Invest in Commercial Real Estate?

By
Mortgage and Lending with Commercial Capital Ltd.

https://flic.kr/p/2m73woL

Yes, it is a line in the movie, Wall Street, but it really is a good practice. Don’t let your emotions get the best of you when investing. As I write this on Monday morning, May 9th, the futures are down huge, pointing to more losses on wall street after a rough few weeks. Rates also are shooting up….but I don’t think we will see a crash at this time. What is happening in the stocks and bonds is finally re-pricing to the fact that inflation is not going away any time soon. Stocks and bonds are forward-looking, stocks ran up on low inflation and low rates and an accommodating Fed, now they are adjusting to the reality that inflation is here and likely to stay for a much longer time than previously thought. They will find a near-term bottom, maybe even today, and will stabilize for a bit.

There is too much economic activity still going on to have a full crash yet. I talk to people all over the country and though most people are far more nervous than ever before, few have changed their buying habits significantly. Credit and credit cards are still easy to get-there has been no contraction in credit availability. So most people are still booking summer vacations, eating out, and buying the things they want. The bigger danger of a crash, in my opinion, is at the end of the summer, when people have spent their money and inflation and the war in Ukraine are still going on. But for now, I think stocks find a bottom somewhere in here and tread horizontally-some ups and some downs but generally grinding lower, we will not push up to new highs. It will be years before we ever touch the highs that were put in at the start of this year. Stocks, for the next few years, will NOT provide good returns. Just one man’s opinion.

So where do you find value? Where are good investments? They are all around you! Opportunities are everywhere-you just have to have a positive mindset and not be cowering in fear. If you are a business owner, the biggest bang for your buck is investing in your business. Whether it is better training, better marketing, or looking for new untapped areas. Your business has the biggest upside with the least amount of risk. Improving yourself could cost nothing, all sorts of sales training are available online for free, and it could yield huge returns-to be a better communicator or leader can reap huge rewards. Customer service has fallen in this country, focus on improving your service, adding value, and you will separate yourself from your competition and improve your cash flow. Look at undervalued assets-they are all around you!

DID YOU KNOW, that an empty commercial building is not overpriced? Ever! Let me explain. With homes, whether you are living in the home or you move out, the home has the same value. But in commercial, the main determinant of value is the cash flow of the property. So an empty building with no cash flow is worth as much as 10 times LESS than if it had cash flow. This leads to all sorts of opportunities to buy something low, re-purpose it, get it to cash flow, and then sell it high. Let’s say you buy a building for $250,000 that is empty. You then get a tenant in there that pays just $5,000 a month in rent. That building is now worth $750,000 at a normal 8 CAP valuation. In other words, that $60,000 in rent increased the value of the building by $500,000 dollars!!!! Let’s say you want to move your business and buy a building-you can do the same thing! If you have a strong cash-flowing business, you could buy that building, move your business in there, do a lease buy-back where you draw up a 10-year lease with yourself at $5000 a month, turn around and sell it. You will make a cool ½ Million while still having a place secured for your business for the next 10 years. We would GLADLY loan you the money in that scenario even at 90% and you could have the whole thing done in 4 months-a cool ½ million. Not bad.

It’s just one of many examples. The bottom line is, that opportunity is still everywhere. Keep your eyes open and have a positive attitude and you’ll start seeing the opportunities all around you. Today, remember the Bob Marley song, “Three Little Birds”, the birds were singing, “don’t worry, about a thing, because every little thing, is going to be all right!” (He got that from Jesus in Matthew 6 by the way-just a little did you know?) 

Have a GREAT day and be blessed!

Karen Schimpf (512)-359-358-1511
karen at applycommercialloans.com 
www.ApplyCommercialLoans.com    

  
Give me a CALL TODAY at 512-358-1511 or get started by filling out this form!

P.S. OUR NEW PRIVATE FUND IS OUT. IF you have an SBA loan or a conventional loan that is in danger of dying because the bank is not going to get it closed in time, GIVE ME A CALL. We can close that on our private fund affordably and then you can refinance out conventionally in as little as four (4) months! WE CAN EVEN GO TO 90% LTV!   Give me a call at 512-358-1511 or get started by filling out this form started by filling out this form

Comments (2)

Jeff Masich-Scottsdale AZ Associate Broker,MBA,GRI
HomeSmart Real Estate - Scottsdale, AZ
Arizona Homes and Land Group/ Buy or Sell

Thanks for the article on commercial Real Estate. Hey I can see Andy Griffith walking down that traditional American down town photo with Barney Fife right next to him. Jeff

May 09, 2022 11:55 AM
Bill Salvatore - East Valley
Arizona Elite Properties - Chandler, AZ
Realtor - 602-999-0952 / em: golfArizona@cox.net

Great information.  Thanks for sharing and enjoy your week! bill

May 09, 2022 01:49 PM