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I am often approached by people in residential real estate by people in different professions such as medicine, law, and others who are not too informed on commercial real estate and what it is really about. When they discover that I invest in commercial real estate, they always ask me, “Why?” Of course they acknowledge the most obvious reason, the amount of money that can be made. However, I am quick to inform them that there are so many other wonderful reasons why ANYONE should be involved in commercial real estate.
Here I have compiled the top six reasons why commercial real estate is a good investment and why you should too.
# 1 – Synergy
The first is really my favorite, the concept of synergy. Synergy is the idea that you put in the same amount of effort, but yield a larger result. 1 + 1 = 3. This is definitely present in commercial real estate. Many of the deals you might be involved in require the same exact process and amount of work, regardless of how large the property is, how much the property is worth, what its best use is, and how much of a return you can make from it.
A $15,000,000 deal can literally require the same amount of work as a $300,000 deal! Because of this reason, I always urge my colleagues to think big, and always go for the gusto! Why exert the same amount of time and energy on a low yielding deal, when you can put the same amount of time and energy, and yield 10 times what that single deal would? I am not a rocket scientist; however, this seems pretty clear to me.
#2 – Leverage
The second reason is leverage, and how it can maximize your return on properties. In commercial real estate, you always want to examine how you can decrease your invested capital while returning the most money. A good way is to borrow part of the initial investment and pay a certain percentage on the borrowed money. The total cost of initial investment can be much lower when you use other people’s money (OPM), and it, therefore, increases your overall return. There are not too many businesses that function is this fashion, and you can definitely use it to your advantage.
#3 – Positively Impacting Communities
The third reason why I chose commercial real estate is the impact I can have on communities. Creating more affordable housing, renovating old, large apartment complexes so that people actually want to live there, finding places for companies to establish a customer base and employ jobs, and increasing the economic welfare of cities are all fantastic reasons to get involved in commercial real estate! You can really have an effect on multiple communities, and everyone will benefit.
#4 – Abundance
The fourth reason is abundance. There is an abundance of properties, types of properties, ways to create wealth, professionals to work with, other people’s money to borrow, and money to be made. There is also enough for everyone in this constantly changing industry. It makes it an exciting place to work, as there is always a new and different opportunity for you to pursue!
#5 – Creativity
The fifth reason includes all the various skills you get to use in commercial real estate. It is not like an accountant’s job where you primarily deal with the same math and the same clients day in and day out, with little varying tasks. In commercial real estate, you must problem solve, be creative in constructing offers and what to do with properties. It requires negotiation, which is fun, building relationships with other professionals that can lead to friendships and lifelong business partners, and, of course, the ability to create massive wealth and happiness that many others never experience!
#6 – Giving Back
I am a strong believer in “giving back” — as you are blessed, to bless others. You have the privilege of using your profits to help others. Whether it is a family member, a person in need, a local charity or your favorite mission, you can use your profits to positively changes lives and impact the world.
There are many more reasons why I enjoy commercial real estate, but I don’t want to spoil it for you. You will develop your own reasons to love the business of commercial real estate.
Commercial real estate can be rewarding personally and financially, and it is a benefit to the community. Think about all the reasons why you want to do commercial real estate and how you can use your success to make a difference! You can make it happen!
Bill Manassero is the founder/top dog at “The Old Dawg’s REI Network,” a real estate investing blog, newsletter and podcast for seniors and retirees. His personal real estate investing goal, which is being chronicled at olddawgsreinetwork.com, is to own/control 1,000 units/doors in 6 years. Prior to real estate, Bill and his family lived in Port-au-Prince, Haiti as missionaries, serving orphaned, abandoned and at risk children for their nonprofit organization Child Hope International.
