Own investment properties

From owning one’s home, it is a small step to owning investment properties.

Decide whether you are going to invest in residential, small retail, small office, or small industrial properties. Specialize. Non-residential offers higher yields but vacancy rates and bad debts are also higher on average – so your skill in finding tenants is important. Industrial and commercial attract professional investors, but small industrial and commercial are open to small investors.

Choose tenants carefully. It is easy to let a tenant in but difficult to evict him or her. Long-term tenants save you on tenanting fees.

Pool the financing together if you have several properties. Larger loans often get lower interest rates.

Negotiate commissions for the transaction and price. Example: See Henry in Profiles

Minimize maintenance costs. Maintenance costs can be a large chunk of your expenses. If possible, learn to be a repair person. Otherwise, find reliable providers and negotiate long-term rates.

Caveat: Make sure you have stable income to support the mortgage gap. An acquaintance bought many properties using commercial mortgages after becoming obtaining a high-income job. Unfortunately, he bought them all about the same time in 1996 and early 1997. When the economic crisis of 1998 came, he lost his job. The property market fell by 50% and tenants were hard to get. Unable to service the monthly payments, he sought protection in bankruptcy.

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