We all are thinking about it and some of us are actually

taking action and getting their hands on real estate

investment properties. The longer the NY Stock Exchanges

doesn’t produce desirable returns the more people are

starting with real estate investments.

For most of us the obvious choice of properties are single

family homes. Although you can invest in real estate

without owning a home, most people follow the experience

they made while purchasing their own home. This is familiar

ground and the learning curve for doing a real estate deal

of this type is pretty slim.

Of course there’s a drawback with this approach. The

competition is fierce and there are markets where investors

are artificially driving up the cost of the properties

while completely discouraging first time home buyers. If

this is the case, the burst of the real estate bubble is

just a matter of time.

How do you avoid these situations and still successfully

invest in real estate? How do you get ahead of the

competition and be prepared for bad times in real estate

investments as well? The only answer I have is commercial

real estate.

Why commercial real estate you might ask? Commercial real

estate is a solid investment in good and bad times of the

local real estate market. The commercial real estate I’m

referring to are multi unit apartment buildings.

Yes you will become a landlord and No you don’t have to do

the work by yourself. You are the owner and not the manager

of the apartment building. The cost of owning and managing

the building is part of your expenses and will be covered

by the rent income.

Apartment buildings are considered commercial real estate

if there are 5 or more units. To make the numbers work you

should consider to either own multiple small apartment

buildings or you should opt for bigger buildings. This will

keep the expense to income ratio at a positive cash flow.

Owning rental properties is all about positive cash flow.

With investing in single family homes it is easy to achieve

positive cash flow. Even if your rent income doesn’t cover

your expenses 100%, the appreciation of the house will

contribute to the positive cash flow. With commercial real

estate the rules are different.

While single family homes are appraised by the value of

recent sales of similar homes in your neighborhood,

commercial real estate doesn’t care about the value

appreciation of other buildings. The value of the property

is solely based on the rent income. To increase the value

of a commercial real estate you need to find a way to

increase the rent income. The formula on how this is

calculated would be too much for this short article. I

listed a few very helpful books where you can find all the

details.

What’s another advantage to invest in commercial real

estate? Commercial real estate financing is completely

different than financing a single family home. While

financing a single family home you are at the mercy of

lenders who want to make sure that you are in the position

to pay for the house with your personal income. Commercial

real estate financing is based in the properties ability to

produce positive cash flow and to cover the financing cost.

After reading all these information about commercial real

estate you want to go out there and dive into the deals.

Not so fast. First, you need to learn as much about real

estate as possible. In commercial real estate you’re

dealing with professionals. If you come across too much as

a newbie you will waste these guys’s time and your

commercial real estate career ended before it actually

started. Second, no commercial real estate lender will lend

you any money if you can’t show at least a little bit of

real estate investment experience.

What’s the solution to this? Go out there and do one or two

single family home deals yourself. It doesn’t matter if you

make huge profits to start off with. Most newbie investors

are loosing money on their first deal anyway. If you can

manage to show positive cash flow with your single family

home deals you are ahead of the pack.

My advice, buy a small single family home in a decent

neighborhood and rent it immediately. This will keep your

out of the pocket expenses at a minimum and you will have

rent income to cover for your monthly expenses. Bonus, you

gain experience as an investor and as a landlord.

Here’s another observation I made during my real estate

investment career. Most people like to analyze, learn,

discuss and analyze some more. They never actually got to

do a real estate deal. They love to talk about real estate

investments, but never did it themselves.

My approach to real estate investment was simple.

• I bought some books about real estate investment.

• I read every single one of them.

• I put together a simple plan on how I want to get started.

• I started looking for properties.

• I bought my first investment property 30 days after I

started reading my first book.

• I made positive cash flow with all of my properties so

far.

What is my point? You have to go out there and practice

what you’ve learned. The only valid credential in the real

estate business is practical experience. Having a couple of

deals under your belt, you can go out there and start

looking at commercial real estate and even impress seasoned

investors with your knowledge. Because you made this

experience by yourself and you know what you’re talking

about.

Book reference for commercial real estate investments:

Gary W. Eldred, PhD: “Make Money with Small Income

Properties”

Jack Cummings: “Real Estate Financing and Investment Manual”

You will find these books and many more on my real estate

investment website at

http://www.suncoastrenttoown.com/author_directory.htm

Sincerely,

Peter Dobler