The Basics: How to Get Started Investing in Commercial Real Estate

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You might have seen one of the many television programs today centered around “flipping” houses, home improvement businesses, and the like. If this sounds like fun, this is actually part of investing in commercial real estate.

Real estate investors take on large projects with plans to make significant returns on their property investments. Though many real estate investors start with a second home, or with a vacation rental property, others choose to take the road to greater riches and invest in commercial real estate.

Commercial real estate includes business properties, large buildings, and apartment complexes. Now, you might think that it takes a great deal of money to begin an endeavor of this size. But, depending on where you live and the type of investment you’re after, it doesn’t have to be.

Here, we’ll focus on the business of investing in commercial real estate and how to get started.

How Much Money Will I need?

Many people think it takes hundreds of thousands of dollars to get started investing in apartment complexes or commercial real estate. While you do need some startup capital, you might not need as much as you initially thought.

The typical down payment for a 75,000 dollar investment property might run you around 15,000 dollars. This is because the typical down payment cost runs around 20 percent of the total value of the property you’re attempting to invest in.

If you play your cards right, over time you can save up that amount in a few years. But, for those who want to get into the game right now and not wait around, applying for an apartment building loan might be your best option.

Apartment building loans for commercial investors are quite popular, especially for those who wish to get started right away. The general timeframe that it takes to secure an apartment building loan is much shorter than it would take anyone to save up 20 percent of the cost of a property’s total value.

And, considering that most large apartment complexes run in the high 6 figure range, a loan is the more attractive option.

Start Talking to Other Investors

While it’s always a thrill to go it alone and make your fortune from the sweat of your own brow, don’t let your pride make you stubborn.

Chances are, you know a few real estate investors in your area. You might even have one or two in your family. Regardless, picking the brains of other real estate investors will allow you to get the inside scoop on how the game is played.

Any real estate investor mentor could share with you several of the following key elements, a few of which might be totally unfamiliar to you:

  • Deal Analysis (cash flow, expenses, mortgage rates, etc.)
  • Lender Reliability
  • Real Estate Attorneys
  • Brokerage Programs
  • Property Insurance

Though the aforementioned is only a shortlist of the many terms that you need to familiarize yourself with, speaking to another investor is a great way to begin to understand all of the moving parts that come along with real estate investing.

Choose a Property

Selecting an apartment complex or commercial property to start your investment career with is probably the most critical choice you’ll have to make. No matter what property you choose, you’ll be spending a great deal of your time (and money) on perfecting this property, maintaining it, and making it the best it can be.

The best advice, especially if you’re new to the real estate game, is to start out small and then build your enterprise from there.

Small complexes offer you the ability to ease into your new investment with the least amount of overhead, and without all of the overwhelm that might come with attempting to manage a larger complex.

No matter what property you choose, you must ensure that it’s a sound investment. Older complexes will come along with many problems, and you’ll be responsible for fixing all of these.

Beginning a career as a real estate investor can be a rewarding experience both personally and financially. Once you’ve gotten your feet wet in the world of commercial real estate, you’ll then be set to learn as you go, and then set your sights on larger properties with even greater return potential.

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