Steps to Buy Commercial Property with No Money
Is it possible to invest in commercial real estate with no money? Fortunately, there is a way and you'll discover options in this article.
Investing in real estate is always going to be a good idea, and there are many people trying to find a way to enter the market. There is also no denying that it can cost a lot of money to begin your real estate investment strategy. But surely there is a way to invest and enter the real estate market with little to no money? Luckily, there is, and we will discuss this in more detail.
So, if you are wanting to invest in real estate, particularly in commercial real estate, then read on for some tips and steps on how to get started. And if you do not have much or any money, then this is for you. Do not let your lack of funds deter you from starting what could become a promising and fulfilling investment career.
Table of Contents
What is commercial real estate?
When it comes to real estate investing, there are two general types. Commercial and residential. Most investment strategies will fall into one or the other. You are going to want to choose between them when you start. This article is focusing on commercial real estate, and you need to understand the difference between that and residential real estate.
Fortunebuilders explains the main difference being that residential real estate properties are leased to families and individual tenants. While commercial real estate is leased to businesses. Some residential properties can also be considered commercial if they are of a larger scope. So, any property that has more than five individual units will be considered commercial. For example, if you were to invest in an entire apartment building or a group of homes.
The most common form of commercial real estate will be leasing to businesses. Such as real estate in office buildings and retail locations.
What are the benefits of investing in commercial real estate?
Both residential and commercial real estate investing can be beneficial, and there are clear pros and cons of each. Real Crowd highlights some of the main benefits of investing in commercial real estate.
Any commercial real estate asset will be secured by a regular income stream through leases. Businesses will tend to be more reliable than residential tenants. It is no small feat for a business to change locations, so once you have a good quality commercial tenant, they tend to be there for the ling haul. You can often charge a premium for rent, especially in high traffic areas such as shopping centers and city centers.
Appreciation of asset value
Commercial real estate is generally of higher value that residential, and therefore the asset will appreciate well. Commercial properties regularly go up in value as time passes. There are many external factors that can assist in raising the value of a commercial property.
There are additional tax benefits and incentives for investors of commercial real estate.
Investing in commercial real estate has so many benefits, and if done correctly can be a real long-term strategy. But if you do not have a large chunk of money to get started, what is the best way to begin? We will now discuss how to get started in commercial real estate with little to no money.
Steps to get started in commercial real estate
Do not let your lack of funds deter you from getting started in commercial real estate. If you have the drive and knowledge, not having money to start should not stop you. Here are some steps on how to get your foot in the door with little to no money.
Source: Tyler Cauble.
Partner with other investors
This step is particularly relevant if you have knowledge that can be useful. If you can use your knowledge or skills, and find a partner who has capital to spare, then you can work together and find a mutually beneficial investment. You could also find investors to help you raise capital. So that way you are not spending your own money, rather teaming with other people to spend their money. But your name will be one of the ones on the investment.
Use an existing asset as leverage
This step will only work if you already own an asset, but it is a great way of borrowing money to purchase more real estate. You will need to find a lender that will lend you money and use the equity of an existing property. Then you can use this money to purchase a new property. If you already own some high value properties, this will be especially beneficial.
Lease to purchase
In the residential real estate world this is known as rent to own. But commercially this idea works also. If you own a business, it can be an idea to find somewhere that will allow you to operate there while leasing to own. You will pay a lease amount above market value, and the excess will go towards the cost of the property. After a predetermined period, you will have the opportunity to use the money already spent and anything else you have saved to have the property completely in your name.
In a perfect world you would have a couple of hundred thousand dollars to put down towards your first commercial property. But we are not living in a dream world. You should not give up on your dream of investing in commercial real estate simply because you do not have as much money as you would like.
Commercial real estate is a great investment strategy and can lead to long term wealth. It can be difficult to get your foot in the door as it traditionally requires a large amount of money to start. There are ways however to get started in commercial real estate with no money. If you are smart and manage your investment well, you can get started with no money and grow your investment.
Charles is the founder of infoSpike.com. His real estate investing experience started in 2004 and he is currently focused on rental property projects. He enjoys learning about real estate investing, personal finance, and marketing. Read more about Charles here.