Make Money On Your Commercial Investment

David Bickell, Broker Associate with RE/MAX Real Estate Groups in Indianapolis, says your temperament for risk determines, to a large degree, how much you'll earn on your investment. For those who want a minimal-risk investment, an all-cash purchase of a property with a long-term tenant (such as a pharmacy chain) would be a sound choice, Bickell says. Such properties would include leases for 15 to 25 years so the investor can enjoy a long, unleveraged return in the 7.5 to 8.25 percent range.

If an investor is willing to take on a little more risk, considering a long-term lease with a company with a very good credit standing is an excellent possibility. The lease on this kind of property would be about 15 years, typically a single-tenant property, such as a dollar-store chain. You can expect 10.5 to 11.5 percent before tax cash-on-cash returns in this type of investment.

For a variety of opportunities, a willing investor who doesn't mind high risk can take cash and put it into purchasing troubled assets, Bickell says. Troubled assets can include income properties performing at or better than the vacancy rates in the market. Investors could choose from office, retail, industrial or apartment buildings.

The highest-risk investment would be bank-owned commercial properties. Bickell warns that you'll most likely need to pay cash up front for REOs. If you are planning on leveraging one of these bank-owned properties, you will need to have the financing pre-arranged before proceeding to the acquisition process. Another way to acquire these properties is by using the group investment platform, where you pool with other cash investors to purchase properties. This will tend to offset some of the risk.

When choosing a broker, don't forget to look at professional designations such as the Certified Commercial Investment Member (CCIM) or Society of Industrial and Office Realtor (SIOR). Also, find out what value-added services your agent provides and ask for examples of various transactions the agent has brokered for different investors. Find a highly qualified RE/MAX Commercial Professional on remax.com and searching the Designations field for Associates with the CCIM designation.

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