All Forum Posts by: Jerry Shen

 I've been pretty happy with my property management so far. Both my properties are long distance. I don't think commercial is any better than residential for long distance.

16 commercial units across two buildings (one office and one retail). No partnerships I own the buildings.

 If I were in your shoes I would just do residential. Fanny and Freddy backed loans are almost entirely income based.  If your net worth is low but income is high why would you want to compete with high net worth individuals for deals? You are going to get killed

I invest in commercial but my lender requires 10% of my capital to be liquid. I keep closer to 40%.

In addition to what others have said about down payment (25% is absolute minimum) and price ($1M is way too low to get a national tenant strip center, you need at least 3-4M) the biggest factor is your liquid net worth. From my experience, lenders will want to see a liquid net worth (what you can convert into cash today) at least 50% of the value of the property. So if you want a NNN center with a national tenant at say, $3M if you don't have at least $1.5M of liquid net worth it's not going to happen.

There is a reason most people start with residential, you can get loans way easier without being already wealthy. Once you acquire the net worth then you can move into commercial.

I invest solely in commercial NNN (started off that way). I personally like it much better than residential as there is a lot less management overhead and leases are usually for a lot longer, plus cashflow is very predictable due to NNN nature as long as you can keep vacancies in check.

The question on whether you can start off in NNN commercial is solely a matter of your net worth and liquid investable assets. Most people don't start off in NNN because they don't have the capital. There is no way you are going to be able to finance 85% to 100% of the deal. 60-70% is more realistic. And you are not going to be able to get anything decent below $2M (500K down) and your net worth needs to be at least 1M outside of your primary residence or banks will not bother talking to you.

So really it just comes down to a significantly higher barrier of entry compared to residential. If you have the resources I would highly recommend it but if not then it's a waste of your time.

Plenty of willing sellers out there, seems like a waste of your own time trying to convince someone who doesn't want to sell to do it. Basic business psychology also suggests you are going to get a far worse deal than dealing with a willing seller. Sounds like a bad plan all around.

@Jacob Prelle standards for commercial lending are out of reach for most people that’s why most people start with residential where they look at income and not net worth. 

If you want to invest in commercial they will look more at your net worth than your income. I closed on a 2.6M office building last year but I had 0 income in 2016. But you will need net worth maybe 50% of the value of the property for lenders do green light a loan.

If you want 10K/mo in cashflow (I'm assuming pre-tax) that's 120K/year. If you are targeting 10% CoC return like I do you will need to put 1.2M down on a 4.8M property (assuming 25% down which is best case scenario, realistically plan for 30-35% down) so banks will want to see a net worth of at least 2M. If you don't have that you will need to partner but I'm assuming you are aiming for 10K/mo on your own.

I think owning vs renting is more of a lifestyle choice than a financial choice. I actually bought my home 100% cash last year. Could I have made more if I used it to buy another investment property? Certainly. But in my case having no house payment and someplace to call a home for my family is priceless from a mindset perspective. I've owned and rented dozens of homes, but it's very difficult to have the peace of mind that comes from a 100% paid off primary residence.

Don't underestimate the power of peace of mind when it comes to generating wealth. My investment properties could tank tomorrow and I wouldn't be foreclosed out of my home, that is a very powerful safety net imo.