This is the third part of the comprehensive Real Estate Guide here at Simple Financial Freedom focusing on commercial real estate investments and other cash-flowing real estate properties. In this part, we will build on some of the ideas that we discussed back in Part 2 about a second investment property.
Investment properties can take many forms such as an office building, a duplex, an apartment building, or a strip mall. If you’re new to the real estate game, you probably want to target a smaller chunk of real estate with only a handful of units and tenants. For younger real estate investors, I believe an apartment building could be a great way to build some wealth.
Apartment Complex
I remember reading a well-known billionaire mention that the one thing he would have done differently when he was younger would have been to buy an apartment building as a young, single guy and live in one of the units and manage the building while living there. Such an apartment building could be a complex with 2 units or maybe 10, but either way, by living in it, you can manage most of the aspects of the building. Like any investment property, there are definite risks such as having credible tenants, maintenance and other major considerations. If possible, try and find somebody who has done it before and convince them to be your mentor or guide. Maybe they will even invest some of their own money and become a partner.
The good thing about apartment complexes is that in a down economy, you should still be able to find tenants especially if you have fairly inexpensive rates.
Office Buildings
With the real estate boom over the last few years, many companies moved from leasing space to buying a building or even building one from the ground up. While this made sense for many years, it is definitely a tough market currently. There are countless office buildings that are in rough shape, many that are losing money. It may be possible to pick up a building for an attractive price.
If you have a sound business that is definitely going to be able to weather potential economic uncertainty in the coming years, you could possible buy a small office building for cheap and utilize one of the units for your business. This is probably the safest way to play commercial real estate, but of course there are still risks involved.
Conclusion
Real estate is a world with many opportunities. Building wealth through the accumulation of properties is an attractive opportunity. Unfortunately, we’re still reeling from the massive real estate bubble that affected every type of real estate in every market in the U.S. and even most markets globally. While prices are down significantly, there is still a very real chance that more declines are coming. As such, it’s important to be very careful with debt levels. Building a portfolio of real estate over time by paying off the debt of each property, then moving on to the next one is the best approach in the current environment in my opinion.
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