picking management teams, protecting it from lawsuits, and overseeing the project. The good news is that after you have a commercial project off the ground, it’s usually big enough that it allows you to pay other people to take care of it. So, it won’t take much of your time at all — and that’s why it’s called a passive investment. Compare this to a single-family home that may require collecting rents and making repairs for many years to come.
All it takes is one big commercial deal for you to be set for life. Doing one commercial deal the right way can generate you a profit several times your yearly salary in addition to providing you sizable monthly income as long as you own the property. Residential real estate can produce a sizable profit as well, but it will not generate anywhere near the cash flow that a commercial property will. You’ll receive one check per month from a single-family residence, but you can receive several hundred checks per month from a commercial property.If you don’t believe us yet, consider this: Our clients shared how they got started in commercial real estate. We found out that one of them is in a project that already has a profit of $10 million or more. Another one bought a piece of land near their home for $1.5 million, and it has jumped in value over the past two years to $9 million (and they didn’t even have to use their own money).
The people that you meet who invest in commercial real estate are all big thinkers. They’re people who have decided that they want to think big, live big, and hang around other people who are just as passionate about life as they are. Until you get involved, it’s difficult to really understand just what your life could look like. Investors of residential real estate think of one monthly check and one tenant; they wait for appreciation (which may never come); and they’re limited in ways of creating massive value for their property.
Deciding to Invest in Commercial Real Estate
We think commercial real estate investing is a great way to generate wealth, and the main reason we like it so much can be boiled down to one word: leverage. Leverage is what allows you to use a small amount of your time and money to bring you a magnified return. Commercial properties are usually bigger and more valuable than other types of real estate, such as houses. What this means to you is that after you figure out how to find, negotiate, and buy commercial property without using much of your own money, you’ll be able to sit back and watch the magic of leverage work wonders for your financial future. Your family will thank you for generations to come.
When people get started with their investing, most of them dream of creating a six-figure annual income stream so that they can quit the rat race. However, deep down many of them have doubts that they can actually make it happen. But never fear. The goal of this book is to give you the starting steps and specific know-how to help you realize that you really can live the life of your dreams. And we want you to do it in a way that creates the lifestyle you want without years of hard work. We’ve helped other clients do it, and we know you can do it, too.
Understand that there are still going to be naysayers out there who say you can’t invest in commercial real estate in today’s market, in today’s economy, or in today’s cosmic layering of celestial occurrences. But you have a choice. You can either buy into what these financially stressed-out individuals are desperately clinging to, or you can let go of everything that’s been holding you back and go after the future that you want and deserve.
HOW A COLLEGE DROPOUT TURNED $4,000 INTO A $120,000 PROFIT IN 60 DAYS
Morgan was the kind of teenager who struggled in high school. He didn’t get good grades, and he didn’t earn a college degree. He worked a variety of jobs until he found himself working as a bouncer in a bar and surviving on 69-cent cans of beans. Financially, he had a pretty bleak-looking future.
For some reason, Morgan had the wild idea that he could somehow make money investing in real estate. So, he drove around town talking to agents and looking at properties. One day he saw a sign on an empty lot that said, “Exxon Corporation Land for Sale.” Morgan didn’t know much about land, but after looking at the county records, he figured that the property might be worth about $200,000.
After calling and meeting with the agent, he was able to put a contract in place to buy the land for $160,000. But now Morgan had a big problem because the agent was calling about the $4,000 earnest money deposit that Morgan had promised to give to them. So, he went down to the bank and talked them into lending him the $4,000 based on the value of his car, which was the only real asset that he had.
Now Morgan was faced with the problem of having to close the deal in 120 days, or he would lose his deposit and perhaps his car, too. So, he went back to the county office and looked at all the other parcels of land around his piece that he had under contract. He saw that there was a larger lot behind his property that could have its access restricted depending on how he developed his property.
With the help of an architect, Morgan put together two sets of plans. One set showed a larger commercial shopping center that restricted access to the lot behind it. He also put together another set of plans with another smaller building designed as a gateway to the property behind it. Morgan’s next step took a straight face. He marched into a meeting with the owner of the property that was behind his property and dropped both sets of plans down. Morgan told the owner (in a nice way) that they had a choice: The owner could either accept a wholesale assignment of Morgan’s purchase contract for $320,000 so the owner could develop it with the gateway, or (if the owner didn’t want to buy it) Morgan was going to develop the property himself and restrict the other property owner’s access.
Morgan was scared stiff at this point because he knew that he didn’t have any way to close the deal himself. Fortunately, the owner agreed to the wholesale assignment of Morgan’s property for a total price of $320,000 — and after they went through the due diligence, the price dropped down to $290,000. The seller got the $160,000 they were expecting, and Morgan walked away with $130,000 in profit by assigning his purchase contract. This happened because of two reasons: One was that Morgan found himself in a place in life where he didn’t have a lot of choices. Either he was going to go for it and make it in life, or he wasn’t. The second reason that Morgan was successful is because he had guts. Guts boil down to a willingness to move ahead, even though you’ve never done it before and even though you’re scared to death. You can find out more about wholesaling in Chapter 4.
Exploring the Available Types of Investments
Most people think commercial real estate is all about apartment rentals. Even though residential properties are a big part of commercial real estate investing, other types of properties make for excellent investment opportunities, as well. For instance, commercial real estate includes offices and warehouses, retail centers, and even undeveloped land.
We define commercial real estate as any real estate that’s bigger than one house on one lot. So even if people live in the property, it’s still commercial as long as it’s bigger than one house. Some people would argue that a little property like a duplex or a four-unit isn’t really commercial. That’s okay. We like keeping our definitions simple. Actually, five or more units in an apartment building is considered commercial,
