Commercial Property: How to Turn 2 Perceived Problems to Your Advantage

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OVER THE PAST few weeks, you have read the 5 Common Myths About Commercial Property.

And also covered in some detail the 5 Reasons Why Serious Investors Prefer Commercial Property.

Therefore, it’s probably time to explore two other issues, which inexperienced property investors often see as being major problems.

  1. Because it can sometimes be difficult to find tenants, you need to significantly reduce the value of a vacant Commercial property.
  2. Because banks maintain a lower loan-to-value (LTV) ratio on Commercial property, that means you will need to contribute considerably more cash up front.

Let’s now unpack these 2 issues — so you can see just how easy it is for you to reshape your thinking about them … and thereby, gain a strategic advantage in the process.

Finding New Tenants

This is probably the #1 concern for most Commercial landlords.

However, in the October Edition of the Commercial Property Made Easy online Magazine (due for release in a day or so), the Feature article is devoted entirely to this very topic.

In tough times, you need to become a little more creative in your hunt for tenants. And step-by-step, you can read about two simple methods — which have proven extremely successful.

Once you grasp the psychology behind both these these methods, you quickly realise that the vacancies are no longer something to be overly concerned about.

But more importantly: Being able to snare a vacant Commercial property at a discounted price is a blessing … NOT a problem. Because, you now hold the solution that very few investors are aware of — even some of the pros.

Funding for Commercial Property

The stated “problem” of Commercial property attracting a lower LTV … actually contains within it, the very seed of the solution itself.

You see, the value of residential property varies little — whether it is occupied, or vacant.

Whereas a vacant Commercial property can significantly increase in value, as soon as it becomes leased.

Therefore, your focus should move from being able to borrow only 70% (instead of residentially 85%) of the property’s purchase price. And you should concentrate upon borrowing 70% of the increased valuation of your Commercial property, with a tenant in place.

In most cases, Commercial properties are valued by capitalising the net rental your tenant pays. And therefore, having the property fully-leased could add around 20% to the value of your property, compared to when it was vacant.

To help you quickly grasp the full extent to which this could benefit you, here’s a simple example.

Bottom Line: As you can now appreciate, there are definite benefits hidden within these 2 perceived problems — once you fully analyse and understand the inner workings.

And hopefully, you’ll quickly discover some fresh opportunities opening up for you … especially in the present Commercial property market.

 

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