a friend and I have been putting money away from flipping residential homes to put towards a commercial property. My question is:
What is a good first commercial property to buy?[i][/i] I’ve read a few books and purchased some other information products and it seems like 50% tell you to buy multi-fam. housing
and the other 50% talk about howmuch of a nightmare it is to own multi family property and suggest things like trailer parks and storage space.
that, and any other tips or insight you could offer a first time commercial property buyer would be very appreciated.
If you have significant experience managing SFH rentals, then you are probably ready to move up to multis or a mobile home park. If you have only been flipping and are thinking of getting into landlording, then I strongly suggest that you start with SFHs and gain some experience.
Spend some time studying business aspects of running a rental property operation. Almost without exception, the popular gurus don’t have a clue about being a landlord and the expenses that go along with it. Look at the websites of professional organizations such as the National Apartment Association. Talk to the successful landlords at your REIA who have a lot of rental units and have been in the business for several years. Ask them about expenses, vacancies, local laws, the local rental market, etc. Ask them about their recent horror stories. Make an informed decision.
Being a low to lower-middle income landlord will seem like a nightmare in the beginning. The horror stories that you’ve heard are real. I keep thinking that I’ve seen everything, but something crazier is always around the corner. The only good news is that you eventually get used to all the drama.
Mike is right in his recommendation on learning the business side of the multi family business and to believe the horror stories . . . they are true and there’s always a new one around the corner.
Another perspective about commercial is the true commercial (rather than residential multi family which is also considered ‘commercial’). After you have learned the business side and making it throgh the drama, there are small to medium strip malls, 7-ll, dry cleaners, etc. that could be excellent deals if they are located well and in an area expected to remain strong in the coming economic climate.
These tenants are business people rather than individuals in their homes. Commercial tenants typically lease for longer periods of time and are responsible for the majority of the expenses a multi family owner typically pays for. Utilities, real estate taxes, insurance, most maintenance are paid by the tenant. And depending on the tenant and type of lease you have, you may consider this type of commercial purchase superior.
Personally, I would look at the numbers and what you expect to make during your holding period and/or on sale. That would decide the property I would purchase.
At this point im open to just about any town in CT. I currently reside in Central CT (southington)
and I’ve been doing flips around this area as well (bristol / southington / new britain)
Ideal local would be in the central CT area. I know this area best.