How to Find Success in Flipping Real Estate
For years now, flipping residential houses has been increasingly popular, but fewer people consider flipping commercial properties. Flipping commercial can be just as, if not more, profitable than residential flipping. Commercial real estate generally refers to property intended to generate a profit, usually meaning office buildings, hotels, restaurants, etc., and these properties can also be successfully flipped. Here’s how to find success flipping this kind of real estate.
Most people know that residential property is valued using a comparison, or comp system. The home is compared to similar properties in the area to find its value. The process for valuing commercial property is somewhat different. Instead of a comp system, buyers will value the property using either a cap rate, gross rent multiplier or cash-on-cash returns. If you want to earn a profit flipping commercial property, make sure you understand these valuation methods and how they will apply to any commercial real estate you are attempting to flip.
Look for Versatile Properties
Home buyers know they’re buying a house to live in, but aside from that restriction they can be more creative with imagining the versatility of the space they are purchasing. Commercial property, on the other hand, can be very creatively limiting. A building outfitted with refrigerated cases and aisles of shelving screams grocery store, and a space with a commercial grade range and hood system is most cost effectively kept a restaurant. If you want to reach more buyers, look for properties which are not as limited by existing structures and can been seen by buyers as a place with multiple possibilities.
Make Sensible Upgrades
Finally, if you want to be successful flipping commercial properties, be mindful of the upgrades you make. Everyone knows flipping any type of real estate comes with making improvements to increase value. These improvements need to make sense for the type of property being upgraded. If you are flipping a restaurant, it makes the most sense to focus on upgrading the kitchen equipment. Making sure your upgrades add purpose and not just aesthetic appeal will go a long way towards ensuring your flip is a success.
Flipping commercial real estate can be an incredibly successful and profitable venture. If you understand the way commercial properties are valued, choose wisely when selecting properties to flip and make upgrades that add functional value to your chosen property, you too can find success in flipping real estate.