Hey everyone, thanks for swinging by. Today, I’m going to talk a bit about commercial real estate. If you’ve been following my blog since the switch to the new CNA Finance, you’ve watched as I finally started to enter the investment market. Now, I’m an investor and, I’ve gotta start thinking like one.
As any good investor would, I did a bunch of research to figure out which investment platform would be best and eventually, I decided to go with Betterment. However, I think I’m missing something big. When we think about investing, we often think about investing in stocks, bonds, etc… or, at least I do. What I was missing is that there are tangible things that I can be investing in. Things like buying properties. I’ve been doing a bit of reading around the blogosphere and, it seems like commercial real estate is a big topic these days. So, I decided to do some digging to see if that would be a good option for me.
Does Investing In Commercial Real Estate Come With A Good ROI?
One of the first questions I had to ask myself was “What kind of ROI can I expect?”. As far as my Betterment account goes, it’s been four weeks and I’m up 1.6%. If we take this along an annual average, that’s an ROI of 20.8%. That’s pretty good if you ask me. Can commercial real estate even come close to that?
Well, what I found in my research was very interesting. I’ve read the stories of bloggers that make over 50% annual ROI when it comes to their commercial real estate investments. That’s amazing! The best part is, this isn’t a ROI that’s incredibly hard to obtain. From what I understand, owners of companies are willing to pay about $1 per square foot per month in my area. That means, if I mortgage out a 1,000 square foot commercial property, I can ask for $1,000 per month and that would be very fair. After looking into what it would cost me, the mortgage would run around $550 per month for something like this, which is very feasible.
Understanding Location When Purchasing!
When it comes to investing in an office space, business owners can be very particular about where their office is going to be located. Let’s face it, foot traffic for many brick and mortar businesses is as important as is virtual traffic for blogs. That being said, if I’m going to buy a piece of commercial real estate, I may want to consider paying more for a better location. But, how do those numbers look when I’m buying it to rent it out?
I looked into my local community and found that commercial properties in high traffic areas often cost more than double the same type properties in low traffic areas. So, I had to take a look at what they were getting for rent. In low traffic areas, commercial space in my neck of the woods runs about $0.35 per square foot. Now, in the high traffic areas, the same property can easily be rented for $1.00 per square foot as I mentioned above. That’s a good chunk in extra rent.
After Looking At All Of These Prices, I Came Back To Reality!
Young bloggers are often looked at as starving artists who work for years before making any money. Luckily, I don’t have it that bad…I make a pretty good living for a simple guy like myself. But, I don’t have $100,000.00 cash to put down on a commercial mortgage! Ouch! Well, I’ll get there one day, until then, I’m sticking with my stocks and bonds!
Do you invest in commercial real estate? If not, do you plan to one day?