Most of the commercial real estate investors that I know started off in the real estate business as residential investors. As you can imagine, most people don't start off by buying a mall or a hotel. So why is it that many successful investors make the switch from residential investing to commercial? Obviously it's possible to do very well investing in houses and small multifamily properties. I know several investors that are very well off that continue to purchase and rent these types of investments. They are comfortable investing in a product type that they understand, and they are content with the returns that they achieve with these investments. I know several commercial investors that were at that stage at one point in their life, and suddenly realized the one advantage that commercial real estate has over residential: leverage.
I'm not talking about financial leverage. I do believe that it is often possible to achieve higher levels of financial leverage on commercial real estate, but that is for another post. I'm talking about leveraging your time. If you are a successful residential investor, at some point you end up with more money than time. You have plenty of cash to find more deals, but you have reached your capacity. At this point you have some choices. You can hire some additional staff and train them to help you locate new deals, you can continue along your path and enjoy the excess cash, or you can move up to the next level of investing and purchase a commercial property (Keep in mind that most real estate professionals include multifamily properties of 5+ units in the commercial category).
Commercial real estate may be more complex then residential, but finding and closing on a big deal doesn't take much longer than finding and closing on a little deal. This means that commercial real estate is scalable, and allows the investor to deploy more capital in less time. Commercial tenants are also often less needy than residential tenants, so investors that manage their own properties save even more time by making the switch. Of course hiring a professional to manage your properties for you is another way to leverage your time, but again that is for another post.
One of the fantastic things about being a real estate investor in Reading, PA is that commercial properties are well within the reach of the average residential investor. There are numerous opportunities to purchase small commercial properties and slowly scale up your commercial real estate portfolio. If you are a residential investor interested in leveraging your time, give me call.
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