Are you into real estate as much as we are? Then, why don’t we dive straight into the world of profitable properties? Let’s build that most lucrative real estate portfolio you’ve been daydreaming about! Whether you’re fascinated by the towering skyscrapers of commercial real estate or the cozy charm of residential properties, this guide will get you covered!
Everyone needs trustworthy assistance in purchasing commercial and residential real estate!
Should you choose between these two? Suppose your aspirations are more far-reaching than that. In that case, you should combine residential and commercial real estate at the same time! Real estate investments continue to be most profitable even during the ongoing inflation. However, we must warn you that you’ll need an expert hand in locating the most promising residential and commercial properties to provide steady monthly revenue!
For this reason, we advise you to contact top-tier local real estate agents in your neighborhood. They will bring the upcoming crucial requirements to your attention before purchasing any property and entering the rental game!
Find your niche!
Before throwing dollars around, you must understand where you fit in the big real estate picture. Are you more of a city slicker, drawn to the bright commercial market of the future? Commercial real estate stands for spaces and units designed for commercial use, such as buildings, retail industry, office buildings, and warehouses.
Or do you fancy yourself a cozy-home enthusiast, splashing straight into the residential market? Know your strong points and weaknesses, and let that guide your initial investments!
Experience can’t be accumulated only through information and practice. For this purpose, we recommend you get familiar with real estate market trends (nationally and locally), how a property is valued, financing options, and the legal nitty-gritty. The more you know, the better and educated decisions you can make.
The secret lies in location!
Scouting the right neighborhood and property is the golden rule of real estate. It can be a super busy business district (like Boston’s CBD, Philadelphia’s central business district, or Chicago’s The Loop) or a suburban neighborhood in great demand (such as Holly Hills, Colorado; Penn Wynne, Pennsylvania; or Carmel, Indiana.) The location will certainly make or break your investment.
You can dodge plausible property devaluation by studying the area carefully! Consider its growth potential and examine its infrastructure, economic opportunities, and job market development. Subsequently, you can evaluate its demand in the market.
Hunt down those hidden gems!
Finding the properties is the fun part. We suggest going through all sources for properties for sale, such as online listings. However, you can get inventive with your search, for instance, attending real estate auctions. Don’t be satisfied with a limited number of properties on the market! You should take matters into your own hands!
Drive around your neighborhood or join social media groups specialized in real estate! Look for hidden gems (vacant buildings) that might need a minor face-lift. These have the potential to shine the brightest. That’s how you can counterbalance the otherwise high price of any residential or commercial property in excellent shape.
Let’s talk dollars and cents!
Set a budget with the help of financial advisors, but don’t be afraid to get a little creative with it! Explore financing options like private lenders, mortgages, owner financing, or joint ventures. We advise you not to put all your eggs in one basket. In other words, try to devise a strategy for success by mixing residential and commercial real estate.
About increasing interest rates while the Fed seeks to stop inflation
Right from the start, we must warn you that applying for a residential mortgage won’t be on cruise control. Interest rates for buying residential properties in the United States vary depending on the type of mortgage, the down payment amount, the investor’s creditworthiness, and the loan term.
Forbes reported that a 30-year fixed mortgage rate crashed the seven-percent threshold and reached a 2023 high of 7.23 percent as of mid-August. The bad news won’t stop here. Nasdaq predicts a nine percent mortgage rate hike by late 2023. The shocking upsurge has made Americans reconsider their homeownership plans and will likely extend their rent.
Inflation and higher interest rates won’t make purchasing and maintaining commercial real estate any easier. Here, the down payment will be exponentially higher than at residential properties, and investors must be able to provide a sum between 15 and 35 percent of the original price.
Crunching numbers and calculating potential profit
Before “jumping into deep waters,” run the numbers! Add up potential expenses on insurance, property taxes, maintenance, and rental income! Once you do the math, you can calculate the return on investment! This will help you decide whether you have a winner property on your hand or a dud.
Remember due diligence!
Before you sign the contract, manage and run a meticulous due diligence. For instance, many rookie buyers and investors forget to check zoning regulations, which can cause substantial financial damage to the “perpetrator.” Get property inspections to gain reliable insight into your property’s design, fixtures, and structure! Don’t forget to review the property’s history. Therefore, you can avert unpleasant surprises.
Do you have plans for the long run?
It would be best if you didn’t believe anyone commenting that real estate is a get-rich-quick scheme. It takes years to master every little detail, from budgeting and financing to actually turning a profit. Have a clear plan for each of your residential and commercial properties, whether flipping for a quick profit or holding onto them for steady rental income. Patience and persistence pay off in real estate.
Network to stay in the loop!
You’re not a lone wolf hunting for its prey that might never come! Instead, we recommend you extend your social and professional network! Connect with other investors. You can consider joining real estate forums and participating in industry events.
Not only will you get topical information on new leasing regulations, but you might also receive some investment tips under the radar. Build a network and benefit from new partnerships, opportunities, and helpful insights you wouldn’t stumble upon otherwise.
The bottom line
Combining residential and commercial real estate investments can offer numerous advantages to investors. You can benefit from income stream diversification, mitigating financial risks, hedging against market fluctuations, and enjoying tax breaks for rental property owners! Residential property owners shouldn’t feel overlooked, as they are eligible for tax advantages related to depreciation. At the same time, commercial properties can have tax deductions related to expenses.
In addition, putting residential and commercial properties together in your investment portfolio will result in higher adaptability to market conditions, leaving you in a more financially stable position during inflation and recession!
So go out there, make some deals, and let those properties work their magic! Remember, it’s not about how fast you get there but about building something that stands the test of time!