Commercial Real Estate Strategies - Minimizing Your Risk Without Minimizing Profit

Whenever most people think of the world of real estate

, they are forced into that mentality of it takes money to make money. While that may be true to a certain extent, it doesnt always take a lot of money to make a lot of money. In commercial real estate, you often get a chance to step away from conventional modes of buying real estate, focusing on deals that do not require a lot of money to pursue. Even if you are fortunate enough to have a lot of money, this system allows you to spread it over many different deals, which can improve your earning potential.

In the case of land, using Joint Venture Facilitation (JVF) strategy instead of buying the land outright eliminates almost all the risk associated with land ownership. In a JVF, you are only a partner in the developement with the landowner and the developer, which minimizes the risks involved in the deal. Using this route enables you to avoid financial risks associated with cash

and availability of credit, legal risks like lawsuits that affect the development and title claims, and regulatory risks common with planning permissions and changes in zoning laws.

For income property commercial real estate strategies, risk is limited via the Master Lease Option (MLO) strategy. Basically this involves leasing the property as a Master Lessee at a fixed rental and then subleasing the various parts to different tenants as sub-lessees. The difference between what you make and what you pay out is obviously your profit. In an MLO, you are testing out the property instead of buying it outright, thereby avoiding the risks of outright ownership. If it proves to be a success, you can exercise your option to buy the property, or you can simply sell your option and walk away with a nice profit. If the project does not work out as planned, you cant wind up in bankruptcy because youre only a tenant. With a proper lease, your exposure is highly limited without large amounts of cash at risk. Most of all, you shouldnt have a problem finding property to use under this strategy as there are plenty of under-performing properties in good condition out there. You typically dont have to wrestle with the problems of poorly maintained properties.

You should master and use both JVF and MLO commercial real estate strategies to see the maximum gain from commercial real estate. JVF deals involve a relatively low amount of your time and expertise because of your partners, which leads to high profits. That said, those deals take time to actually see money coming in because you have to wait for the property to be sold or refinanced before you can see some cash. MLO deals, on the other hand, can provide you with virtually instant income and cash. The choice is up to you as to which one you use, but often the best people in the business choose to deal with both.

There's a lot more information about this at http://www.makemoneyincommercial.com.

by: JGilbert

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