Well, many economists sort of did. There is a theory that since the late 19^th Century, the U.S. economy has been on a repeating cycle that lasts an average of 18.6 years. According to this theory, every 20 years or so there is a major economic event, including a crisis. In 2020, that’s been negative oil prices coupled with COVID-19. Twenty years ago, it was the dot-com crash and 9/11. Twenty years before that, it was the Iranian Revolution and the energy crisis—and so on, for more than 100 years.

While today’s economic conditions may feel unprecedented, they aren’t. As investors, we have to keep level-headed, knowing this economic situation is very temporary, normal, and predictable. I don’t think this is the end of a cycle where everything crashes. I think this is a mid-cycle correction.

In the first half of a cycle, the economy is always amazing. Since 2010, there have been 1,500 all-time highs in the stock market’s value. It’s crazy! But now, oil prices and the virus have put a hurt on the stock market. People are pulling out, looking for somewhere safe to stash what they have left.  A whole lot of them are going to invest that money into commercial real estate.

When the cycle turns, we see people take their money out of the stock market and put it in real estate in the second half. Real estate is much more stable and tangible than stock: You can get insurance on it; you can see it and use it. I am not predicting that we are about to see low prices on commercial real estate—far from it. There will not be any more deals in real estate in the next 7–8 years than there were in the last 7–8 years. This is not going to be like 2008.

But there are going to be a lot of people investing in real estate. There will be a lot more deals made and a lot more credit. As part of the PPP government bailout stimulus, large banks and small banks alike have been granted billions. The government and banks will be giving out a lot of credit as a form of stimulus. A lot of that will be going into commercial real estate. After about 7–8 years, that cycle will end much like we saw in 2008.

Right now, what we are experiencing is a pause in the game, a chance to get up from the poker table and take a stretch. When this pause is over, it will be game on. Credit will be everywhere soon, then capital will be everywhere. Everyone who just lost their shirt in the stock market will want to put their money somewhere where they’re not going to lose it. The commercial real estate market will be flush with cash and credit. If you are confident and you are educated in this business, right now the world is yours in commercial real estate.

As all smart investors know, the time to invest is when there is blood in the streets. Emotions are heightened right now; people are scared. Make smart investments right now and watch their value skyrocket as the money floods into the commercial market. We are living in interesting times, and interesting times are when investors get rich. Make smart plays, and when the cycle ends in another 7–8 years, you’ll be ready.

The post Commercial Real Estate Investing in the Time of Coronavirus appeared first on Arab Gateway Funds .

After mastering that segment of the marketplace, however, the most confident and aggressive investors usually move into commercial properties, as well. When done right, the financial rewards are simply bigger than what can be achieved with residential properties—but the risks are bigger, as well.

For new investors, there is sometimes a little confusion about what we mean when we’re talking about commercial properties. After all, if you’re leasing out a single-family residence, it sure feels like a commercial investment! Nevertheless, commercial real estate usually refers to one of the following:

• retail buildings
• office buildings
• warehouses
• industrial buildings
• apartment buildings
• mixed-use buildings, where the property may have a mix of retail, office, and residences

Each of these types of properties has its advantages and risks for investors. It takes experience to be able to effectively size them up quickly. But there are some very compelling reasons why so many residential investors move into the commercial market.

1. Less Maintenance

Maintenance problems and property damage are a major expense when it comes to residential investing. The headaches here are smaller with commercial properties. Because commercial properties are intended for business use, tenants are more likely to do their part in keeping the property well-groomed and in good condition, especially when they receive customers on a day-to-day basis.

2. Income Security

By leasing your property for a longer-term contract, you can usually buy yourself a few years before you will need to deal with vacancies when the lease expires and the tenant chooses not to renew the contract. That provides better income security and higher cash flow than residential, single-family homes.

3. Bigger ROI

Commercial real estate has the potential for a significantly higher return on investment (ROI) compared to most residential properties since the lease terms typically require much higher monthly rents than the average rent of a single-family home. Other income streams may be available, too, such as parking fees, maintenance fees, etc.

4. Faster Appreciation

Unlike the assessment of a residential property’s value, which is often based on the average comps of surrounding properties, the value of a commercial real estate is more often based on the total amount of revenue generated by the property. The more revenue your tenants provide, the more your property is worth, no matter what’s next door.

5. Triple Net Leasing

A triple net lease (NNN) is a lease agreement in which the lessee shall be in charge of paying all property expenses, including building insurance, real estate taxes, and the cost of repairs and maintenance, on top of the rent and utilities. Chain outlets and other successful concepts typically prefer this kind of arrangement because it allows them to maintain the property according to their brand and have better control over their image. It also takes all those expenses (and the accompanying stress) off the property owner’s shoulders.

If you’re ready to start dipping your toes into the commercial real estate investment market in Houston or anywhere else, it’s a good idea to work with an experienced lender like arabgatewayfunds.com.

The No. 1 rule of real estate is “You make money when you buy,” so don’t waste time waiting for the perfect opportunity or the perfect team. Set your minimum deal criteria and keep looking until you find a property that meets it.

Happy Hunting!

The post Why Residential Investors are Moving to Commercial Real Estate appeared first on Arab Gateway Funds .