Text 3. Real estate investment - the next step forward

Read the text and answer the questions:

1. What properties can be called commercial?

2. Where can you earn more money investing in commercial estate or residential property?

3. Why commercial property management is simpler?

4. Are there any difficulties in commercial real estate investment?

5. How can you increase the value of your commercial real estate?

6. Is it difficult to get a loan in the bank if you work with commercial real estate?

7. Why do professional investors like to put their energy in commercial real estate?

8. If you want to go into real estate investment business what is the best start: in commercial or residential real estate?

Commercial real estate investment is the natural progression from residential property investment. Experienced property investors tend to move into commercial real estate sooner than later - and for very good reasons.

Commercial properties include offices, industrial sheds, free standing retail shop, bulk retail, block of shops, medical centers, service stations, motels, hotels, back packers, health clubs, churches, funeral parlors, child care centers, car yards, convenience stores, shopping malls, to name just a few. Each type of commercial real estate investment has its own peculiarities, strengths, problems, rewards and risks.

The return on investment in commercial real estate is much higher than residential property. The income is also more stable because of the long leases.

Commercial property management is also much simpler because tenants have a strong vested interest to maintain the property to a high standard. Tenants usually derive their income from the property. They have to keep the property looking good and maintain functionality to impress their clients.

By far the biggest risk in commercial real estate investment is finding a new tenant in case of a vacancy. In commercial real estate the requirement of each tenant in terms of size, location, use and rent payment capacity is so different that it is very difficult to get the right tenant for the right property.

For the reasons mentioned above it is also difficult to sell a commercial real estate investment. The higher the value of property there are the lesser number of investors to buy the property. A commercial real estate investment is less liquid than other investments because there are very few players in the market. For a residential house there will be hundreds of potential buyers which is not the case with commercial properties.

You can also increase the value of your commercial real estate simply by raising the rents during rent reviews or re-negotiating the lease terms when it come up for renewal.

The funding for commercial real estate investments is harder to get as banks look at the quality of tenants, length and terms of lease. They will typically fund a maximum of 50 % to 66% of the market value of the property. The lending rates are also marginally higher. You will therefore need more equity to buy. This reduces your leveraging power to buy more property.

Commercial real estate is where professional investors put their energy because of the higher returns and ease of managing them. For these investors commercial property is their 'bread and butter' and they drive their speculative income by trading in residential properties.

Commercial real estate investing is very rewarding but requires more knowledge, experience and capital outlay. It is advisable not to jump into commercial real estate from the very outset until and unless you have the knowledge, very deep pockets and risk taking ability. It is advisable to start with residential real estate investment to build your equity and cash flow.

You should buy at least 8 to 10 residential investment properties before venturing into the world of commercial real estate.

real estate investment residential property property investors return on investment vested interest capacity lease terms fund lending rate leverage power capital outlay risk taking venture

инвестиции в недвижимость жилая собственность инвесторы капиталовложений в недвижимость прибыль на инвестированный капитал закреплённое право, признанное право; сильная заинтересованность способность условия аренды капитал; фонд, денежные средства; капитализировать; фондировать; помещать деньги в ценные бумаги ссудный процент использовать кредит для совершения финансовых сделок способность капитальные затраты, расходы капитала принятие риска рисковать (чем-л.) ; ставить на карту

Ex.1. Read and translate the following sentences from the text. Mind your grammar!

1. The return on investment in commercial real estate is much higher than

residential property.

2. The income is also more stable because of the long leases.

3. The biggest risk in commercial real estate investment is finding a new tenant in case of a vacancy.

4. Rent payment capacity is so different that it is very difficult to get the right

tenant for the right property.

5. The higher the value of property there are the lesser number of investors to buy the property.

6. Commercial property management is also much simpler because tenants have a strong vested interest to maintain the property to a high standard

7. They have to keep the property looking good and maintain functionality to

impress their clients.

8. The biggest risk in commercial real estate investment is finding a new tenant in case of a vacancy. You can also increase the value of your commercial real estate simply by raising the rents.

9. This reduces your leveraging power to buy more property.

10. Commercial real estate is where professional investors put their energy because of the higher returns and ease of managing them.

11. For these investors commercial property is their 'bread and butter' and they drive their speculative income by trading in residential properties.

12. It is advisable to start with residential real estate investment to build your equity and cash flow.

13. You should buy at least 8 to 10 residential investment properties before

venturing into the world of commercial real estate.