When talking property investment, most people still gravitate towards the familiar category of residential. However, seasoned investors have long been privy to the power of commercial and have been keeping the lucrative world of commercial property as their best-kept secret. If you’re looking to get started, these seven key steps will help you make the right choices where commercial property is concerned and lead you on the way to growing a passive income that you can live off.
1 Garner an investment mindset
Shifting from a fear mindset to an opportunistic mindset is the number one key to successful commercial property investing. It will help you achieve larger goals, resulting in higher-yielding properties, stronger growth and ultimately more revenue.
An investment mindset, conversely, will deliver results sooner, as it gives you the unique advantage of seeing beyond what everyone else sees. The ability to look past flaws in a property and value the costs of their remediation allows you to purchase better based on the numbers, compared to your everyday investor.
Most importantly, though, it will help you set realistic expectations around what you will experience when becoming a long-term commercial property owner. It’s realistic that you’ll one day have to deal with problems such as losing a tenant at a bad time or copping a large unanticipated maintenance bill.
These issues are part of property ownership and how you deal with them makes all the difference. Vacancies can be challenging, but it’s about staying positive and working out solutions, and saying, ‘Well hang on, I’ve made my money back already via growth,’ or why not take advantage of the vacancy by doing minor fix-ups and renting it for more?
2 Set a goal and develop a savings plan
Setting an income goal will change the way you invest. You’ll no longer be looking for risky short-term investments; instead, you’ll look to invest in higher-yielding properties, which will promote the idea of saving money. We suggest centering your income goal on your desired annual passive income amount. For instance, if you believe you need $100,000 passive income to live a comfortable life in retirement, that’s the figure you should strive towards.
To get into commercial property, you need at least $100,000 in cash savings to get started. Otherwise you can use equity from other investments or even your home.
This $100,000 can be leveraged into a $400,000 commercial property. The table below shows the costs to purchase an entry-level commercial property.
3 Asset selection
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