How Large Properties Mean Big Money in Real Estate Investing

You can make a lot of money with large rental buildings because more rental units usually equate to more money. This is not always the case, but often it is. One large building can produce as much annual profit as a person might earn working full time every week of the year. If this doesn't seem fair, don't cast your opinion too quickly. Running a big building is not easy; a lot of work is involved. Even if a management firm handles most of the day-to-day chores for you, it still is up to you to oversee and direct the management company.

It's much easier to buy buildings when you have steady employment outside of the rental business. Your goal may be to become a full-time landlord, but don't rush it. Serious money is at stake. After you gain experience as an investor and a landlord, the job gets easier.

Build a solid rental portfolio gradually, and begin to live off of your rental earnings. The money is good when you buy the right buildings and run them properly. The biggest mistake most investors make is the desire to get too big too quick. Growth is good, but ballooning overnight can be disastrous. The risk is greatest when you have very little equity in the properties you buy.

The financing options for commercial grade buildings are limited only by your imagination and your lender's willingness. Really, anything goes with big buildings, as long as all the parties agree to the terms. For example, a seller of a commercial grade property can hold a second mortgage to reduce the amount of cash you need to buy the building. You might also find a lender willing to loan the full amount of your purchase price if the price is well below the real estate's appraised value. Some lenders -- gamblers by nature -- are more interested in making money from interest rates than placing conservative, secure loans. Finally, you can use equity and other buildings as collateral for commercial loans. The only limits are those you and your lender place on the deal.

Some lenders will not work with creative financing. Other lenders welcome the opportunity. Some lenders don't want to touch commercial deals. They work in the secondary mortgage market and won't take loans they can't sell. Simply put, they don't want to service the loans. Other lenders specialize in commercial loans. For these reasons -- and plenty more -- you must shop for the right lender. Don't limit yourself to your local bank; talked to a number of bank representatives. And don't concentrate all your efforts on banks; explore mortgage bankers and mortgage brokers. Ask about loan policies from all legitimate lenders that make loans in the area where your proposed building is located. Leave no stone unturned. If you plan to buy a number of buildings in the coming years, you will benefit greatly from working with more than one lender. A lender that welcomes you with open arms when you buy a six unit building may have no interest in working with you when you propose a four unit building.

In short, don't be intimidated by large buildings, for that is where huge money can be made.