The five best commercial real estate type for individual investors are apartments self-storage shopping
centers office buildings and mobile home parks.
And in each of those categories really discuss why we the in them.
The sweet spot and the pros and cons of each.
So let’s start with apartments.
Our hearts are in the commercial business.
FIVE units and greater.
Let’s try a place and a duplex is consider residential five and greater is commercial.
I personally see no public buildings as large as a thousand units and as small as five units all across
the U.S. Why do we invest in apartments.
Well there are several reasons.
First of all everyone needs a place to live.
So the demand is great.
Next is cash flow.
You could generate lots of cash flow in the part of business next is forced appreciation.
That’s right you can force the appreciation of your destiny by increasing your and reducing expenses
or a combination of both.
The net result is your improved bottom line will increase your profit.
So you can force the appreciation.
Next is apartness produce great tax shelters.
And lastly Armas as you make your mortgage payments you’re reducing your principal and you you’re creating
So after a few years you’d be amazed at the amount of wealth you can rate by reducing your or your equity
answer about increasing your equity increasing your cash flow.
You’ll be amazed at watching your rate there.
Now in my opinion of these five the easiest to get into our apartments and the most difficult to get
into would be office buildings which we will discuss in a couple of minutes.
Next is the sweet spot.
What’s sweet spot in our business is between 500000 and 5 million.
I personally don’t do anything below 5000.
It just isn’t working for now.
Anything above five five billion.
I avoid as well and I recommend as the individual you avoid as well because there’s so much competition
at that level you’re playing against the big banks the large institutions the trusts and folks like
that where we can’t compete with.
So this is will be between 500000 and 5 million a month for the part of business would be if your neighborhood
developer is building or building new apartments now new bills can affect your ability to attract the
So that would be something to watch out.
And the other one I want to discuss briefly would be sometimes people would do bad deals and that’s
it that’s definitely a cause.
So I’m hoping that you’ll continue to watch these videos and learn how not to make those mistakes.
Next is self stores now self stores on commercial buildings went into those rooms where people store
their stuff and the rooms or the units can be as small as five by five or 10 foot by 30 foot long.
And people store the stuff in there.
They can also Stow on the outside.
There are bees and they’re bolts and you probably see these buildings as you drive along the way that
a large single story two story buildings where there’s roll up doors all in a row.
Next is why do we invest in self-storage.
Well the story of business is pretty much identical to the part of the business but you’re missing two
things to your advantage.
Do two things.
Are you missing tenants here and the missing repair of toilets two missing tenants missing toilets here
in some services and people love that.
So stores also create lots of cash flow as well as 4C appreciation.
Now let’s discuss this sweet spot for self-starters.
I’ll make it simple for you.
The sweet spot for for some stores is to buy a large enough so stores sale where you can employ a prop
OK so you are a beginner.
Do not try to manage this by yourself.
So buy a large enough self-storage or sweet spot to big enough to afford a property manager right.
Don’t do this yourself.
Next is the pros and cons South-North compare this to apartments is it is not labor intensive or maintenance
Meaning that there is no tenants.
So very few employees.
And also since there are no toilets and things repairs much is no maintenance intensive it will as well
be evictions in substories are rather easy to do.
Basically someone doesn’t pay or Solms itself.
You can actually take two things and sell it for the rent to recoup your rent the next self-storage
pro will be that experts consider of service to be recession proof.
And what do you mean by that is doing the economy when the economy is booming.
People buy extra things and want to store things.
And our economy is taking people downsize and need to store their the things they bought previously
so it can be a win win.
Here’s a card for self-storage.
The card would be that if the neighborhood tanked neighborhood has decreasing value or is going the
wrong way what can happen is you can make your self storage facility not that desirable.
Who wants to put their viable things into gear with where they don’t feel comfortable driving too much.
This story and so in the self-service location location location is really important.
The last conference of source is that it could take a while to fill up your self-storage to occupy all
the units in your part of business.
Everyone has a place to live and this is the worst.
Not everyone needs storage so be careful there.
Our next our last we just discussed the apartments so stores that’s the stuff shop is now I’m going
to group some centers into one category.
If I may and I’m going to say that shopping centers are supercenters centers large or small and less
include shopping malls indoors and outdoors OK lump them all together.
Why invest in shopping centers.
Well I would say stability stability is worth here.
You know that most shopping centers that tenants sign a five to 20 year lease that is long term income.
That’s a good thing all right.
Also make sure other senators that you are extremely selective in your in your town it helps.
What I mean by that is your tintype track your foot traffic foot traffic is going to bring people to
your shopping centers to use the or to shop at the stores and thus create value for this shopping center
and its owners that they will stay in their long term and do well now you do is make sure that you pay
attention to your content mix to make sure that that each tenant can’t miss the other.
In other words that you can’t let the foot traffic for each different take.
Now for some this is a great tenant that we’re being great foot traffic would be for example a grocery
chain a large grocery chain.
No the will be a chain pharmacy like CBS or Walgreens or riding.
We’ll be there.
They will generate foot traffic for years to come.
Again the sweet spot for some sellers I would say as an individual type just beginning by small start
small and then scale up because the con for shopping centers is that it is capital intensive.
Meaning that you get lots of cash and what can happen is you shop in the center.
If let’s say for example your entertainment your your your grocery store it moves up.
They can take it.
They can take with them or as much as 25 percent of the income.
In meantime if they believe you’re to be paying the mortgage insurance taxes while they’re gone.
And why are you building up the place for the next tenants who need cash to hold on.
That’s all right.
That’s less focus of office though.
All right so we covered up our Vince substories shovels there’s all the stones.
Now all of that has to be a single building with one in it all the way up to a skyscraper that’s 80
floors and dozens of tents so.
So from a single all the way up to a skyscraper.
Why do we invest in all this though.
Well when the economy is booming their bids can be astronomical.
It really can.
I personally thing all this building investors and owners make tens of millions of dollars if not hundreds
of millions of dollars by holding on to the office building for long term eight to 10 years.
I have seen it.
The sweet spot for all those feelings I get.
Start small buy a building with what will its look long term leases.
Next is the con for office building will be office buildings tend to follow the economy so as the economy
goes up you’re always going to see performance goes up as the economy goes down.
Your Go voice tends to trickle in it goes down as well.
So you have to make sure that that you follow the economy business in the coming cycle as you open your
Now one thing you are doing is what I would avoid.
I would avoid buying a luxury class A Arbusto.
And the reason why is again this is something that the big dogs the large institutions the rates all
these big players go after the class a lecture Golding’s and they’re overpriced because those guys will
pay for that.
And as investors we have to pay attention to our returns which should be higher than what those guys
Lastly our mobile home parks now ballparks get a bad rap over the years they have and just doesn’t deserve
So here are two situations for a mobile home park investments the first situation is you all the mobile
home park and what you do is you rent to a person who has a mobile home and they put them on a whole
other lot and they pay you rent.
Or are you just reading off the dirt.
The second situation is you all the lots.
You know the park and go home and you rent both of them too.
We prefer and the experts prefer that you have the mobile home park and you rate up just that there.
And the reason why it is to make sure that you’re only paying to maintain the dirt in the surroundings
and not the whole mobile mobile homes can deteriorate very quickly and you don’t want to get into that
business that way.
If you’re going to buy a ball park with lots of holes and take a gamble you might as well do apartments
Because the rates are much greater and you have a inefficiency there.
Next is why.
Why do people in this mall on Mars want they invest in it.
Not because they’re pretty but because they produce cash.
So more arcs or cash flow.
The next is what’s the sweet spot and get you keep it easy for you.
The sweet sweet spot should be by a mobile home park that is big enough to warrant a property match.
Now if you want to manage it yourself I still recommend you hire a management company or a manager put
them on site.
Learn from them later on if you do it yourself.
You can let them go Tieger yourself.
But if you’re just starting out how do you make them and you buy a ballpark big enough to employ a property
Now let’s discuss pros and cons more options.
All right the pros are made from up from from all parts of former housing demand.
This country is great and will continue to a great degree.
Now you know that over the next 20 years there will be 10000 baby boomers retiring each each day.
Over the next 20 years so the demand for affordable housing.
There’s just not enough supply.
There’s going to be a limited supply of mobile home parks in the city because city governments don’t
want to build home parks.
They want brand new brand new apartment buildings.
They won’t brand new stuff so if they want brand shops.
They want a brand new office buildings not mobile home parks so mobile home parks are good because you
won’t be any more new ones next is a promo art would be tennis Tensei a long time and that’s because
it’s rather difficult complex and costly to move their home from one park to another or from one sea
So they tend to stay a long time.
All right next our cots for more home marks the first time to be mobile home parks.
Do you have a negative reputation.
They just do it.
It’s I believe it is not desert but let’s face it they do.
The next town will be financing from all parts of baseball prefer to lay down something that they can
see touch and feel so based tend not to want to land two mobile home parks.
Because of that because banks are seeing mobile home parks as living on dirt.
And again they would prefer to live something they can see touch and feel.
That means that if you were to get a loan ballpark the interest rates would be rather high compared
to the OF THESE.
And a down payment is rather high compared to the rest of us.
But there’s a silver lining in the several is because of the situation tiered lending situations.
Most mobile home mobile home park transactions are self-financed finance.
That means that you can creatively finance mobile home parks.
So now we finish discussing apartments or stores shopping centers office building will want cars.
I will leave you with two nuts.
The first is I want you to focus right by focus
is as an individual investor I want you to focus either one of these at the beginning on my focus is
follow one course until success.
In my experience I’ve never seen a really really good partner who also themselves thought something
to themselves to be the best investors I’ve seen.
They focus no number one.
Number two is as you jump into this business.
I want you to weigh the profitability and the size of the investment.
For example if you have if you’re considering a five unit or a budget unit I want you to consider the
profitability and size of each.
Because the amount of time and effort it takes to buy a five unit or a budget that is will be just about