Commercial Property Investing Has Almost Countless Options

Lease options are definitely my students and my own most profitable and least risky investing strategy. But when you’ve been a real estate investor as long as I have, you become very familiar with other highly profitable sectors. Commercial property investing has an almost limitless number of niche possibilities. Commercial investing can be more complex than single-family homes but it can also be more profitable.

One thing that I want to point out right away is that the lease options investing strategies I share in my books and courses are also applicable for commercial investing. Readers who want to transition their lease option skills from single-family homes to commercial properties can do so by understanding the lease options and applying them to commercial property investing.

About Commercial Property Investing

Commercial property investing involves everything from retail space, to offices, warehouses, multifamily apartments, medical facilities, manufacturing space, hotels, and much much more. I can’t cover all of these in this one article. But many investors graduate from single-family homes to multifamily apartments as a natural transition within the residential niche.

If you’ve been to a major city in the last eight years, you couldn’t help but notice the skylines are dotted with construction cranes. Many of these are building new high-rise buildings to fill the insatiable demand for apartments. But you don’t need to build a 50-story apartment building to cash in on constantly climbing rents.

Anything with five or more units is considered a commercial rental building. But of course, you can start with duplexes, triplexes, and quads that are not considered commercial. These smaller properties are typically privately owned by the average landlord. There are lease option deals (between landlords) on these types of properties that easily fall within the capability and capacity of smaller investors wanting to step up to multi-family rental units. One thing to be aware of is these multiunit lease options won’t often be sandwich lease options because you don’t resell apartment units to a family. Your goal will be to take ownership or to make it a cooperative lease option to another investor. There really are countless ways to put together real estate deals using lease options.

Monthly rents vary considerably in different cities but the national average for a two-bedroom apartment was $1,809 in 2019. Besides high rents, there are other outstanding financial reasons why apartment buildings are extremely attractive for commercial property investing. Four additional wealth-building factors are:

  1. Leverage – controlling and collecting rents on a high value property with little investment of your own.
  2. Appreciation – in addition to rents constantly going up, the building value steadily increases over time.
  3. Amortization – having the rental income pay off the mortgage until you own the building outright.
  4. Paid off mortgage – the rent income dramatically multiplies your bank account once the loan is repaid.

The facts go on and on to make the case that apartment building ownership is a good investment. Filling people’s basic housing needs is always a good investment strategy. The downside is almost nonexistent. When home purchase affordability is out of reach, apartment vacancies go down. When apartment vacancies go down, rents go up.

The Senior Housing Continuum

People always need somewhere to live and with more than 73 million baby boomers now in their retirement years, senior housing has a lot to offer for commercial property investing. An important consideration when catering to this community is that they are transitioning into their golden years. For most, it is a phased approach.

Beyond the Shuffle Board. Senior communities are moving away from simply keeping older people occupied. Today’s high rent senior communities feature life enrichment activities that boomers are demanding. One of the trends is that many boomers are first choosing semi-retirement because the average boomer is about $500,000 short for the retirement lifestyle that they wanted. The bottom line is that many senior housing facilities are gravitating towards accommodating part time working seniors. Another change is offering lifetime education and self-improvement services. Baby boomers are tech-savvy, this means semi-retired and life-enriching senior communities need to include modern technology.

Continuing Care Retirement Communities. This is a major phase along the transition continuum. The old retirement and nursing home concepts are fading into the past. Today’s concept for retirement housing is Continuing Care Retirement Communities (CCRC). These are facilities designed around allowing the elderly to progress from an active lifestyle to an assisted living lifestyle, to a full nursing home environment without having to relocate in their later years.

These communities are designed so that seniors continue living independently while progressing into assisted living when their needs change. Eventually, they can move into skilled nursing care accommodations when required (all within the same independent community they are familiar with and have friends in). What today’s seniors are looking for are senior housing options that include independence, choice, and social networking. As time passes and their health demands, they want access to progressive care within the same community. Being close to outside medical facilities is a big bonus.

No Loss of Freedom. The CCRC model offers a combination of single-family housing and apartments. Often, newly retired or semi-retired people first move into a smaller single-family home and take care of all of their own needs while still having the security of on-campus assistance if needed.

As times and requirements change, they move into easier to maintain housing arrangements providing needed services – apartments within the retirement community they already know. The appeal of the senior housing continuum appeals to baby boomers entering their retirement phase as well as their adult children looking to assist them. Commercial real estate investors need to stay tuned in to this new market that 73 million baby boomers are now defining.

Micro niches within the senior housing niche. This is why commercial property investing offers almost countless options. Some retirement communities include spacious amenities like golf courses, tennis courts, and walking trails. The space requirements mean these will be located in the suburbs. On the other hand, some are full service, last stop facilities. One example is a large high rise in Seattle that was originally a children’s hospital. Today, it has been converted into a combined 93-unit assisted living and memory care (dementia) property. This one is in the heart of the city with extensive full-service medical facilities nearby. The possibilities with commercial property investing are endless.

Real estate investing is all about finding creative solutions that work for you and others. What you need to do now is TAKE ACTION!

By Wendy Patton

For more than 30 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.

If you found this information useful, please visit again soon at wendypatton.com.

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The Importance of Seasoned Funds and Paper Trails

If you’re paying all cash for your real estate investments, you’ll have no troubles because no banks or other financial institutions will be involved with the transaction. But if a bank is involved with the financing, they are going to require well-documented seasoned funds and paper trails. I’m going to explain this to you but the good news is that when you invest using sandwich lease options, there is so little of your own money involved that banks and financial institutions are not an issue for you.

Let’s begin with an explanation of seasoned funds and paper trails and why banks require these. A big concern that lenders have is that you might have borrowed the funds for the down payment to qualify for the loan that they are about to make to you. It means that you will be obligated to repay another loan and it could make it difficult for you to afford the loan they are making. For that reason, banks want to see that the funds you are using are seasoned (have been in your account for 60 to 90 days). They will also look at your detailed bank records to see if you have been making payments on a loan that you have not told them about. That could be an indication that the money is borrowed.

Banks are also concerned when unexplained money suddenly appears in your account a short time before it will be needed to close the real estate deal. These are funds that they want to see a paper trail for. They want to see copies of the checks and/or wire transfers. Again, they are looking for borrowed money that can make it difficult to repay the mortgage loan the bank is about to make to you.

Something that is even more important for you to know is that sandwich lease options don’t involve banks or other lending institutions. That means there is no need for you to have seasoned funds and paper trails.

Why Sandwich Lease Options Don’t Require Seasoned Funds and Paper Trails

Sandwich lease options are a private arrangement between you (the investor) and the seller of the house. Most important is that you are taking out an option to purchase the house but you do not have an obligation to buy the house. That means you don’t have to apply for a loan from a bank. Seasoned funds and paper trails are not an issue for you. This is one of several big reasons that sandwich lease options are a highly preferred method of investing in real estate. Sandwich lease options are about “controlling the property” without the hassles of ownership.

You complete the entire transaction without needing any seasoned funds and paper trails. But that doesn’t mean you don’t need to understand these. With the sandwich lease option, your biggest of three paydays comes when the end buyer completes the purchase of the home. The end buyer is going to need to obtain a mortgage to complete the deal. The end buyer (but not you) will have to show documented seasoned funds and paper trails. Because you are the expert in the sandwich lease option process, it’s wise for you to understand seasoned funds and paper trails so that you can help your end buyer.

Instead of seasoned funds and paper trails, you only need to come up with a relatively small “option fee” to take control of the property. You’ll even be repaid that small cost very quickly. As soon as you take control of the property, you put an end buyer (tenant/buyer) in place that pays you an option fee. This is the first of your three paydays because the option fee paid to you is significantly larger than the option fee you pay to the seller. For you, there are no banks involved, no need for seasoned funds, and no need for paper trails.

How to Help Your End Buyer with Seasoned Funds and Paper Trails

For your end buyer, this involves funding the down payment and closing costs. They will need a bank account so the lender can request copies of bank statements. The lender strongly wants this account to have signature authority limited to the names that will be listed on the property title or deed. This account is where the bank looks for seasoned funds that have been there for 60 or 90 days. Banks also ask for other financial information like pay stubs but they want to see normal and expected transactions happening in the bank account.

The bank’s concern with paper trails involves unexplained large cash deposits (or a stream of small deposits). Some lenders do allow down payment funds to be a gift from close family and friends. These can be explained in a letter to the bank from the person making the gift. The letter needs to be clear that the money is a gift that will not have to be repaid. Not a big deal but it does require a documented paper trail.

There might be other deposits to the account that require an explanation. This could be pay from a temporary second job or from selling an asset such as a boat or unneeded car. Explanations are fine as long as the money is from a legitimate source and doesn’t have to be repaid. You may want to help your buyer understand this ahead of time so that there are no complications when the time comes to complete the sale.

None of this is difficult when you use the sandwich lease option method. Because you only control the property, you are never on the hook to obtain a mortgage. Your only role involving seasoned funds and paper trails is helping your buyer put the paperwork together so that the deal is completed and you collect the big payday at the closing table.

If this is the type of real estate investing method that you want to use, I highly suggest that you take immediate action by getting in touch with us.

Let’s get you started making money today!

Wendy Patton

For more than 35 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.

If you found this information useful, please visit again soon at wendypatton.com.

For more exclusive content, please subscribe to my RSS Feed and YouTube Channel.

What did you think of this article? Please leave a comment below.

Three Things to Kick Off the New Decade the SMART Way

The New Year of 2020 is more than just a new year. It’s a whole new decade of opportunities and the ideal time to plan your future. This is a wonderful time in the real estate world for setting new goals or refreshing existing goals by taking another look and making adjustments.

As always, one of my main goals is helping others succeed. What I’m sharing today are the 3 action steps that I know will help every real estate investor get the New Year and New Decade off to a fantastic start.

 

1) Set Your 2020 S.M.A.R.T. Goals

Goals should be straightforward and emphasize what you want to happen. Specifics help us focus our efforts and clearly define what we are going to do.

S.M.A.R.T. goals:

S = Specific

M = Measurable

A = Attainable

R = Realistic

T = Timely

Specific is the What, Why, and How of the SMART model.

What are you going to do? When writing out your goals, use action words such as direct, organize, coordinate, lead, develop, plan, build, etc.

Why is this important to do at this time? What do you want to ultimately accomplish?

How are you going to do it? By… taking specific actions.

Ensure the goals that you set are very specific, clear, and will stretch you, but are still realistic. Instead of setting a goal to “invest in profitable properties,” set a specific goal to “take control of three properties in 2020 using the Sandwich Lease Option method.”

Measurable. If you can’t measure it, you can’t manage it. In the broadest sense, the whole goal statement is a measure for the project. When the goal is accomplished, what does success look like? However, there should be short-term or small measurements built into big goals.

Choose a goal with measurable progress so that you can see progress happening. How will you know when you reach your goal? By being specific! “I will have my first house under contract by the end of January” shows the specific target and measurement. “I will make good investments” is not measurable.

Establish concrete criteria for measuring progress toward attaining each goal you set. When you measure your progress, you stay on track and you make target dates happen. You will experience the exhilaration of achievement that spurs you forward to succeed at your ultimate goal.

Attainable. When you identify goals that are most important to you, you begin figuring out ways you can make them come true. You develop the attitudes, abilities, skills, and financial capacity to reach them. You begin seeing previously overlooked opportunities to bring yourself closer to the achievement of your goals.

If you set goals that are too far out of your reach, you aren’t likely to fully commit to following through. Although you may start with the best of intentions, the knowledge of how difficult it will be causes your subconscious to stop you from doing your best.

A goal needs to stretch you slightly so you feel you can do it but that it will require a real commitment from you. For instance, if you aim to have five houses under contract during the first week of January, we both know that is not likely to happen. But setting a goal to have one house under contract in January makes having a second one under contract in February much more achievable.

Success breeds success by keeping you motivated.

Realistic. This is not a synonym for “easy.” In this case, realistic means “do-able.” It means that the learning curve is not a steep vertical slope; that the skills needed to do the work are available and that the project fits within your overall strategy and goals. A realistic project has resources available to increase your skills and knowledge to bolster your confidence.

Devise a plan for getting there that makes the goal realistic. The goal needs to be realistic for you at this particular point in your life. A goal to obtain financial freedom with your next deal is not realistic if you are just getting started. Instead, it is more realistic to partner with someone that already has experience and success.

Goals that are too lofty set the stage for failure. But goals that are too low undermine your true capability and the results won’t motivate you upward.

Timely. Set a clear time frame for the goal: for next week or the end of January. Putting an endpoint on your goal gives you a clear target to work towards.

If you don’t set a time, the commitment is too vague. It tends not to happen because you feel you can start at any time. Without a time limit, there’s no urgency to start taking action now.

Timely must be measurable, attainable, and realistic.

You will benefit financially in 2020 with goals based on the SMART method.

2. Synergize with Like Minded People

Whether you already have your real estate investing goals for 2020 or are just starting to plan them, working with likeminded people will help you in many ways. You can bounce your ideas off people with years of experience and they will also share with you what has already worked for them. It’s no coincidence that real estate investing club members are more successful than lone wolf investors are. It makes perfect sense that if two heads are better than one, a hundred heads are going to be a whole lot better than one. Experienced members remember what it was like getting started. Not knowing how to go about writing a solid sandwich lease contract or finding the best attorney for the job are only two examples of help you will find with a club. As a member of a real estate investing club, you are surrounded by professional investors, rehabbers, wholesalers, lenders, contractors, brokers, attorneys, accountants, landlords, property managers, and more! These are people with answers to your toughest questions.

Information is King. If you think cash and good credit are what you need most to become a real estate investor, you would be wrong. What you need most is a strong desire to succeed and the knowledge that you will find at a topnotch real estate investing club.

What you are looking for in a real estate investing club is one that holds at least one meeting a month. The meeting needs to combine networking with presentations about marketing and strategies. The real estate investing club also needs presentations made by local as well as nationally recognized active investors.

Start 2020 by joining your local real estate investing organization in order to attend educational workshops and seminars, network, and learn about local resources. One of the most important resources is “what’s new” in your community. Every region of the country has active real estate investing clubs. In the Michigan area, I recommend and encourage readers to join Michigan Real Estate Investors (MREI).

3. Take Action By Starting Right Now

Real estate investing success is happening all around you. You see it on TV. You hear about it on coffee breaks at work. Your parents have been homeowners as long as you can remember. Maybe your cousin even made a decent chunk of change flipping an inherited rental left to her by her mother.

2020 is a new year and the start of the next decade of your life. It’s time to take action. Right here and right now, you need to commit to taking at least one positive action in your real estate career. Create your S.M.A.R.T. goals or attend a local real estate investing meeting. Better yet, do both! For those who live in Southeast Michigan, Michigan Real Estate Investors invites you to attend the next meeting on Thursday, January 16. For those not in Michigan, an Internet search will show the closest Real Estate Investor organization to you.

Real estate investing is not a life or death decision. The number one fear is a fear of failing. People fail at many things but get right back up and have great success the next time. Fear of failure leads to analysis paralysis. It leads to inaction. Make 2020 the year that you TAKE ACTION with a plan that minimizes the chance of failure and maximizes the rewards.

Happy New Year to you and wishing you success in 2020!!

Wendy Patton

For more than 35 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.

If you found this information useful, please visit again soon at wendypatton.com.

For more exclusive content, please subscribe to my RSS Feed and YouTube Channel.

What did you think of this article? Please leave a comment below.

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