Forget the market – Focus On The Fundamentals

 

With the markets tighter than they have been for years regarding yields more commercial property owners are considering selling in the hope of making more money.

It’s a great time to sell for vendors and a harder time to buy (in some ways) for investors.

I say harder… because returns are slimmer than they have been in recent years. On the other hand… interest rates are still ridiculously low.

When I started interested rates were over 15%, so I look at 5% as a massive opportunity.

I find it crazy when I hear people complain that they don’t want to enter the market now because of lower yields.

Now is a great time to get into commercial property if you can find the right deal.

What I think people forget are the fundamentals.

Just because the market is doing whatever the market is doing does not mean that there are not still great deals out there to be snapped up.

The fundamentals don’t fly out the window because the market changes.

You’ve got to know what you are wanting to achieve with each investment.

Get clear on that first and then look for that deal.

For me, it’s usually cash flow more than anything else.

I recently got an email from one of my mentoring students who had bought their first commercial property… and they really bought big.

But it was a good deal. They followed the fundamentals.

They bought a building that had ten tenancies (including two apartments).

There were a heap of upsides to this property some of which they were able to engage straight away.

For them, they were looking for cash flow.

…So they did what they knew… renovation.

That’s where they strayed from the beaten path. Instead of renting out the apartments to a regular tenant, they set one up for Air BNB.

That took their potential rent from around $900 a month to over $2200 (and that’s not even at full capacity)

In terms of adding cash flow, this is a brilliant way to go. It’s also something that I’ve done many times myself.

It’s a way to get more from what you’ver already got and as there are people who will happily manage the whole things for you for a small cut, you can add income without adding work.

Of course, if you don’t mind doing a bit more work, then you can take all the extra and pocket it.

There are other upsides which are worth looking at. In the case of these students and their deal, they also had the opportunity to strata up the shops and the apartments.

This is perfect if they wanted to create an exit strategy by selling off some of the properties and pay down others.

This is not rocket surgery at the end of the day.

The market can do what ever the market can do, but if you stick to the fundamentals and make sure you are buying well, then you are always going to be in a good place.

I got an email this morning from a guy who was saying that he doesn’t want to go into commercial property because of Amazon.

Amazon is coming to Australia, and he feared that this was not a sound investment.

That’s exactly the sort of thing I hear all the time… from the uneducated.

Do shops still exist in America?

Of course, they do.

In fact, when I hear that sort of thing it just makes me think that it’s that thinking that keeps the competition low in commercial investing…

Which is good for me and you if you get educated on how to do it right.

 

Want to find out more about how focusing on the fundamentals can help you replace your income faster than any other real estate investment? Can I invite you to join my next free online web training? – Go here: register for the next one coming up.