If you’re thinking of investing in commercial real estate, but assume that you need to be worth millions to do so, take heart – you don’t need to be a real estate tycoon to get started in CRE. Triple-net lease (NNN) investments are a great place to start, as they have a lower barrier to entry than most and an equally appealing return on investment.
Commercial Real Estate on a Budget
Here’s a list of 10 ways you can make money in commercial real estate, even if you’re on a budget:
1. Consider NNN lease properties. These can start as low as $350,000 and financial institutions typically lend for them as they are leased by reliable, investment-grade tenants.
2. Join with another investor to buy an absolute NNN lease property.
3. If you own a home then decide to rent it for two years, after the two years, you can sell it and use the profits in a 1031 exchange (deferring all capital gains tax) to purchase a commercial NNN property. This allows many people with residential rentals to become commercial real estate investors who realize a better ROI, with fewer expenses and responsibilities.
4. Buy a pre-foreclosure commercial income property; these are properties where the owner is behind several mortgage payments and is about to be foreclosed.
5. Buy real-estate owned properties (REOs), which are bank-owned properties that were taken back in foreclosure.
6. Take over the commercial mortgage and lease agreements for a property owner who just wants out. Often, these types of deals are high-maintenance properties. However, at a later date, you could sell the property and re-invest into something more stable, like a NNN property, with little or no maintenance.
7. Buy properties being auctioned “at the courthouse steps.” These are in the process of being foreclosed on, so they are auctioned off to the highest bidder (cash-in-hand). If nobody bids, these properties go back to the bank and become REOs.
8. Purchase a sale-leaseback. In a sale-leaseback, a corporation or entity sells its property and/or building yet remains the tenant and maintains control of the site and operations. At closing, the corporation will “sell” the property to you, the investor, and “leaseback” the space with an absolute NNN lease, thereby becoming the tenant. With most sale-leasebacks, the buyer becomes the owner of an already thriving business with a long-term, high-credit tenant, and little-to-no responsibility.
10. Look for a seller-financed commercial income property.
Are You Ready to Invest? Answer These Questions First
Before you begin your commercial real estate buying process, do a little risk assessment and planning first. This will give you a roadmap to what might work best for your goals and be within your budget. Start by answering the following questions:
- Will you be living on the income?
- How much monthly income do you need?
- Are you investing a portion of your wealth or all of it?
- Are you spending your entire 401k?
- Do you need to borrow money to make it happen?
- Does the rent need to service a debt or loan?
- How much do you have available for unexpected expenses?
- Are you going to manage the property or pay someone to do it for you?
- Would you prefer a responsibility-free NNN property?
- What lease term suits your goals (10, 15, 20 years)?
- Do you need depreciation for tax purposes?
- Do you need tax write-offs?
- Do you want equity for collateral or financial leverage?
- Do you own another property that can be used in a 1031 exchange?
Once you have this information, it becomes easier to search for a property/tenant that fits your needs and finances. If you’re new to CRE, Westwood Net Lease Advisors strongly recommend you consider absolute NNN lease properties and work with an experienced advisor to find a property that will suit your needs the best.
NNN properties typically offer dependable income, no landlord responsibilities, reliable monthly income, guaranteed rent no matter what, and tax opportunities. Lenders are open to financing NNNs due to the nature of the investment-grade tenants and long-term leases (10 to 20 years).
Why Using a Buyer’s Advisor is a Good Idea, Besides the fact that It’s Free
If you’re conducting a property search on your own, those listed on the open market are only a portion of what’s available. If you work with the Westwood Net Lease Advisors team, we have industry connections and proprietary tools to help take your search to the next level by communicating with developers, builders, other NNN lease owners, and corporations that sell without listing their properties. These tools and connections provide many advantages for finding premium quality investments at the best price with the least amount of risk.
Westwood’s buyer representation starts before the property search begins and goes all the way through closing. We are your advocate to make sure your best interests are met and our representation is free of charge. Now that’s how you do CRE on a budget!
To Wrap it Up – You Can Get into CRE on a Budget
No matter where you are on your life journey, whether you’re investing in retirement or still working and planning for your future, you can get into the CRE market on a budget. Our goal is to help you acquire the right investment within your budget and assure the first year of ownership is a smooth endeavor, giving you a truly passive, reliable investment that offers a stress-free income and tax opportunities for many years to come. Contact us today for a no-obligation, free consultation. 314-997-5227