The Big Deal About Big Deals

In the current economic environment, assembling real-estate deals is not as easy as it once was.  Due to the meltdown of the financial sector in 2008, banks are being very cautious about whom they are lending to and the amount of loans attached to a person's name.  For the prudent investor, however, this financial meltdown has brought many residential real-estate investment opportunities to the surface that, for the regular person, may never have come to fruition.

 

Because fixed-rate residential loans are the preferred choice for most income-property investors, in this current environment, it would be extremely wise to purchase as many residential real-estate properties as possible to capturing the benefits of having a fixed-rate loan.  However, this comes with one caveat; fixed-rate loans are typically government-insured residential loans, which have their limitations.  Previously, lending was loose and a large percentage of bad loans were made that precipitated the financial crisis.  In the aftermath of these events, there is now a cap on how many government-insured residential loans a person can have to their name.  In the current economic environment, it's nearly impossible to obtain more than four government-insured loans. 

 

Most investors should never be satisfied with the status quo and should always be looking for new deals, new opportunities and new ways to make a profit.  That is why this particular situation may force many investors to take the next big step into big deals as more opportunities arise, namely commercial properties.  By taking the path of commercial property investments, you fully escape the realm of government-insured loans and take an active approach to creative deal-making. 

 

Because long-term loans, such as the 30-year fixed-rate loan, for commercial properties flat-out do not exist, commercial investors can create new deals using non-traditional means, such as seller-financing, venture capitalists, partners, friends and family which are all outside of the 10-year fixed-rate commercial loan that you may be able to obtain from a bank. 

 

When most people think of commercial property, most often they think of the 'ol mighty ‘brick-and-mortar’ type property.  We suggest thinking outside of the box and look for deals in self-storage, mobile-home parks, RV parks and apartment complexes.  The unique aspect of these types of investments is the ability to increase the occupancy rate through land and building improvement to increase cash flow and drive up the value.  In commercial properties like these, the ‘value play’ is in finding deals that have room for improvement.  In other words, it is not necessarily ideal to purchase a property with 100% occupancy rate because there is only one way to go from there and that’s down. 

 

As federal and state regulations continue to change the business and investment atmosphere, we as investors must play the game and continue to 'look under the rocks,' so to speak, when searching for new investment opportunities.  Always be looking for the next big deal and diversify your real estate portfolio by making new creative deals with OPM (other people's money) in commercial properties.  Making the move from residential properties to big deals can quickly turn your investing business into a “big deal” in and of itself.

Action Item: Look beyond the limitations of government insured loans and step into the world of big deals. (Top image: Flickr | ardenswayoflife)

The JasonHartman.com Team

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