For every real estate investor that succeeds, nine fall by the wayside. Know the truth of the matter and learn what can help you stay in that small group of successful commercial real estate investors.
Fortunately, there are many who have gone before you. Unfortunately, there are many that have failed. Did you know that 95 percent of want-to-be real estate investors never buy a single house? It could be that there are too many investor gurus spouting off about the millions these would-be investors will make someday. The truth is, it takes hard work and patience and it does not happen overnight. Of course, all the new and latest and greatest house flipping shows on TV don’t help. Let’s turn off the set lighting and get out the incandescent bulb. Ah—there—a dose of reality. Real estate is not a get-rich-quick scheme.
Treat this investment strategy as a business and decide which kind of commercial real estate investing is right for you. Focusing on one strategy helps keep your intention steady, particularly when you are just starting out. Decide if you are geared more towards becoming a fix-and-flip or a buy and hold investor. A fix-and-flip investor, as you probably know from HGTV, is an investor who purchases a property with the sole intent of renovating it in order to sell it quickly and make a profit. These types of investors often buy distressed properties. As a fix and flipper you need knowledge of the markets that you will be targeting as well as construction costs and either a real estate license or know someone in the field.
A buy and hold investor purchases a property with the intent to hold on to it, possibly do some renovations, and then rent it out. Their business model is one of multiple streams of income. This type of commercial real estate investor requires someone good with the numbers game and the markets. What are comparable properties renting out for and what do you need to rent your property out for in order to see a profit. You will need to consider taxes, utilities, maintenance and, of course, financing.
How to Get Funding for your First Commercial Real Estate Investment
This is where the rubber meets the road and where many first time investors fall by the wayside. Persistence and due diligence is the name of the game. For many, traditional commercial real estate loans are not an option. Conventional lending institutions follow strict guidelines. These include the need for good to excellent credit scores, a certain debt-to-income ratio, documentation of income and, usually, anywhere from 15 to 25 percent down. They also look to the source of the money used.
An alternative first time real estate investors often use is a hard money lender. These are usually private individuals that offer asset-based loans. They will require a budget, a plan and an exit strategy which refers to how you intend to pay them after the project is complete. At Level 4 Funding we work with over hundreds of private hard money lenders. Call us to see if this type of loan is right for your first project.
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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