Real Estate Investing

While residential real estate investing gets the most mainstream attention, commercial real estate investing is a major profit avenue in its own right. Make no mistake — both investment options can be very profitable and neither are easy. However, the best option for you depends on your personal preferences.

Here are the pros and cons of residential real estate:

PROS

-These units are generally easier and quicker to rent than commercial property.

-There are plenty of tax breaks available.

-Residential units are fairly easy to finance.

-With multi-unit housing, you can not only diversify your income to soften the blow if a tenant moves out, but you can also live on site and keep a closer eye on the property.

CONS

-With single-family property, one lost tenant is a significant blow to the monthly income.

-The lease terms are typically shorter, which means you spend a lot of time marketing and looking for new clients.

-These properties can be extremely time- and labor-intensive. Unless you hire a property manager, you are essentially “on call” for emergencies at any hour of the day or night.

Here are the pros and cons of commercial property:

PROS

-Longer leases mean more stable income.

-There are tax breaks here, too.

-Management requirements are much less demanding, and facilities are typically not open 24 hours.

Often, tenant will pay a “pro-rata” share of expenses like maintenance and upkeep or property taxes.

CONS

Downpayment requirements and interest rates tend to be higher for commercial financing.

Finding tenants can be a more difficult task.

Process of obtaining financing is much more complicated.

The negotiation of a sale or a fee or a counter-offer can be very intimidating, especially to the uninitiated. But by remembering a few simple tips and getting some practice, virtually anyone and everyone can learn to stand their ground and negotiate like the pros.

Don’t assume. It can be easy to automatically assume that your offer is so outrageous or presumptive that it will never get a second look from the other party. Do not make these types of assumptions, but project confidence instead.

Identify your strong points. How can you justify your offer? Maybe the property is overpriced or underpriced, has been on the market a short time or a long while, or HOA or parking fees are exorbitant or non-existent. These arguments could be spun either way to get buyers to pay more, or sellers to simply pay closing costs or even decrease the asking price. When negotiating realtor’s fees, it could be small details like if the realtor is only helping with the open house and closing, but not with marketing. Less work equals less pay.

Don’t sweat the small stuff Who gets to keep the chandelier? Who pays for new appliances in the kitchen? These details are small - don’t let them make you take your eyes off the prize. You want the house first, and the details can be taken care of in other ways.

The Salt Lake City Home Buyer blog offers a tremendous list of the best ways to approach specific situations. This can be an invaluable tool for FSBO sellers or buyers with no agent representation. In all successful negotiations, it’s important to be fair to both sides, but at the end of the day, confidence is the key.

The Capital Region Builders and Remodelers Association in Albany, NY has launched an advertising campaign for the second year in a row to boost the local housing market. Fearing that too many local residents have bought into the media’s portrayal of national housing statistics, the association is spending $40 million on two 30-second commercials. The ads will be seen over the next couple months on local television stations, pushing the message, “Don’t believe the national headlines.”

The ads don’t include statistics, but maybe they should have because the statistics aren’t altogether bad. For instance, median home prices in the Albany region grew 1.8 percent last year, while there was a 1.4-percent decline in median home prices nationwide. On the national scene, sales of existing homes dropped 13 percent, and new home sales dropped 26.4 percent. In the Albany region, sales of new and existing homes saw a combined decrease of only eight percent. This was the first time in 10 years the Albany region saw a year-over-year decline.

Indeed, Albany was number four on our list of the top 12 residential real estate markets that offer hope. They have managed to weather the storm fairly well thus far. Syracuse also made the list. Seattle, Austin, Salt Lake City and Boston did as well, along with a sprinkling of smaller markets. There are plenty of blog posts out there about how local markets are faring better than the national statistics, but this is the first I’ve heard about a home builders’ association taking things into their own hands. Kudos to them for trying to boost the local economy and building industry.