How To Make Money In
Commercial Investment Properties Without Ever Owning One
A Real Life Example...
When I tell some people that they can make money with commercial
investment properties without ever owning them, they usually think I've
been watching too many late night infomercials.
When I tell them
they can do it with as little as $1000 they usually roll their eyes and
think I'm crazy. And then of course they want to know how! I usually
But, instead of offering some hypothetical example, I
walk them through an actual deal (involving a 23 unit apartment
property) that I was a part of.
Sidebar: The technique that
am about to share works with any type of real estate... houses,
land, commercial property, apartment buildings, etc. The important
thing is to try and understand the concept, and once you do that you
can apply it to any real estate investment.
Let's walk through this example together. I will tell you which party
to the deal I was after the fact.
Controlling Commercial Investment Properties With
real estate investor found a 23 unit apartment complex for sale. The
property had been on the market for a while without much action. This
particular investor knew the market quite well, and hence, knew what
the true market value of the property was. With the knowledge that the
investment property had been for sale for a while, he made a below
market offer on the property. He offered a $1,000 deposit and asked for
(in his offer) time to conduct his due diligence. The offer was
The investor was excited. Not only did he know that he
was getting the apartment complex below market value, he also knew that
the rents were below market. Another thing he knew (as all commercial
estate investors know) was that when it comes to commercial investment
properties, for every $1 in monthly rent increases, the value of
the property increases by approximately $120.
example, assuming a 10% cap rate, if he could raise the rent of each of
the units by $50 per month, he could instantly
add $138,000 to the
value of the property.
Combining the below market price he had
negotiated and the value he knew he could add to the property, the
investor figured that within the first year of ownership, his new
investment property would be worth $250,000 more than he paid for it.
In other words, he now controlled a
potential profit of $250,000, for just $1,000.
When A Deal Sours, Turn Lemons Into Lemonade "As They
for the investor, he could not qualify for the financing (apparently he
owned too many other commercial investment properties at the time) that
in order to close on the deal. He was disappointed to say the least,
but instead of walking away from the deal empty handed he sat back and
evaluated his options.
Because he still had an assignable contract he knew that he still owned
the right to purchase the property, and he
knew he had a good deal. After all, the owner of the contract stood to
make a quick profit of $250,000!
Sell the contract.
what you know now, (and trusting that the figures I have given you are
correct) would you be interested in purchasing this contract? Probably.
At least you should be.
As it turns out, the investor did sell
the contract to another
investor for $25,000. In other words, he turned
his $1,000 deposit into a quick $25,000 profit (less the fees he paid
to a commercial real estate agent to find a buyer for the contract).
Clearly it was a good deal for the initial investor. But was it a good
deal for the other party who bought the contract? Well, I can tell you
that it has been one of the most profitable commercial investment
properties that I have ever owned (yes, I was the one who bought the
If you would like more details on this deal and how it played out click
Return from Commercial Investment Properties to Real Estate Investment Business
from Commercial Investment Properties
to Apartment Building Real Estate
Investment For The Rest Of Us home page