Commercial Real Estate Investment Properties

There are basically two ways for a real estate to increase in value.

1. Appreciation - The definition of which is... An increase in the value of a property due to changes in market conditions or other causes.

2. Forced Appreciation - In other words, you don't wait for market conditions to increase the value of your apartment building, you make the value go up!

Since you and I have no control over #1, let's focus our attention on #2.

Understanding how to increase the value of a commercial real estate investment is, in my opinion, vital to being a successful commercial investor. The mere fact that you have dozens of value increasing techniques available to you when dealing with commercial properties is one of the biggest advantages of entering this field.

For the most part I will stick to value increasing techniques for apartment buildings, but many of these techniques are just as valid for other types of real estate investment properties.

For clarity sake, in order for an apartment building to be considered commercial property, it has to contain 5 or more units. And the reason that that is relevant is due to the fact that most buildings containing 4 units or less are valued strictly based on comps, and not based on the capitalization of the income streams they generate. Having said that, many of the techniques below will not apply to fourplexes, triplexes, duplexes and single family dwellings.

If you are new to commercial real estate investment, some of the terminology and concepts I talk about here may seem foreign, like "capitalizing income streams". If that's the case, the best way to get up to speed is to get your hands on a good course or book that can walk you through what you need to know to get started as an apartment building investor (or other commercial property). One course I can recommend to you is written by a colleague of mine and deals specifically with helping people buy their first apartment property .

Now, one final note before we start. In order to understand how to increase the value of a commercial property, you must first have some understanding of how such an investment property is valued in the first place. If you need a refresher, or are new to this topic here is an introduction to commercial property valuation .

Alright. Let's get going.

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