Commercial Vs Residential Which Real Estate Is Best

Commercial Vs Residential Which Real Estate Is Best

Commercial Vs Residential Which Real Estate Is Best 

Dolph how we doing buddy good to see you  it's good to see you my friend thank you  for meeting up with me you're welcome  thank you for coming here guys check it  out I'm here with the legendary golf the  roost and today we are putting the  boxing gloves on we are going to be  doing the epic showdown of real estate  real estate investing versus commercial  residential business Commercial May the

best boxer win boom  I'm turning dreams into reality yeah  [Music]  normally with Dolph it's all good fun  and games but today we're putting a  million dollars on the line and we're  asking a really important question  if you had to make a million dollars  would you do it in the game of  commercial would you do it in the game  of Real Estate I've done over two  billion dollars worth of residenti

al  real estate this dude has worked on  multi-billion dollar projects so today  The Showdown gets real are you ready I'm  totally ready yes okay so here's a  million bucks Dolph okay and here's the  question yeah what's easier to make a  million dollars in commercial or  residential commercial hands down false  the most easy way possible because you  can do unwilling commercial and it'll  make yo

u 10 million and it can take you  a decade and 50 houses to make that same  I'm not gonna lie Dolph has like some  element of Truth in that a single deal  you literally can make well over a  million you can make 10 you can make 100  million dollars right so should we just  finish the conversation no thank you for  admitting because there are other  benefits and other things like who wants  a pile

of money I don't want a million  bucks you know what I want I want a  residual income that's passive that's  controllable that covers not just all my  minimal expenses but all of my lifestyle  I actually want to have that I'm going  for in residential it's done it for me  so which is better  well residential thank you commercial  has done it for me okay let's find out  and full disclosure we both

live in  houses and we both office out of offices  this is true but we're talking about if  you've got a marginal lump of cash and  marginal million bucks that you want to  invest where would you place it I  personally would far sooner place it in  commercial than residential we'll see  okay in all fun and seriousness we've  all done our fair share of residential  deals commercial deals and obviou

sly  brother you are the king of commercial  just as last year Dolph helped me buy a  seven million dollar building and one of  the things that it did is it helped me  save a million dollars in taxes and so  you know it's not always about making  money sometimes it's literally about  some commercial for me is often a tax  game but it's also a really powerful  Cash Flow game I would say though that

there's a lot of people intimidated by  commercial because it can seem daunting  at the thought of buying you know a  million dollar building a 10 million  dollar building a 100 million dollar  building is kind of scary don't you  think it is scary and I understand that  it's daunting for a lot of people and  I'm grateful that it is because if it  weren't so daunting there'd be hundreds  of thou

sands more investors in  commercial property and I'd have a lot  of competition so one of the amazing  advantages of commercial is I have much  less competition than you would in  residential well and that's true because  I built systems and when I look at the  last two billion dollars worth of Real  Estate 6 500 homes we've transacted I  buy these up with people all over the  world that are new t

o the game of Real  Estate they partner with me we go in 50  50 into the game and they're taking  money that they've set aside in 401k's  IRAs and they've done the math and they  know it's not enough money and there's  for a lot of people there's something  that just feels more comfortable and  familiar with starting out in  entry-level residential real estate as  opposed to the game of commercial

so  whereas I've got I think a large market  share of people that want to play my  game there's very few that want to  players but when they can play it at the  level you do there's no doubt how big  you win  that is true it is also a fact that most  people have lived in a house at some  stage so they know what to look for if  they go and look at a house that they're  looking at buying and there'

s no kitchen  or no front door for that matter they're  going to say hey there's something wrong  with it and they can identify but most  people when they look at Commercial Real  Estate they wouldn't know what would be  missing to justify them not buying it so  it's daunting and that's why many people  stay away from it well we're going to  jump in right now on the major  differences between both

and by the end  of the video we're going to see who the  winner is I think that's a good idea  okay here we go  okay let's get clear on just a couple of  basic definitions when we talk about  residential investing we're talking  about you know single-family homes more  or less it could be a duplex a Triplex  for fourplex in terms of banking and  lending we're talking about four doors  or less on

a building that a bank gives  you money on where you're typically  doing a long or short-term rental and  it's easier to get your financing in  place for conventional loans or getting  a home equity line of credit meaning  well hey the bank says that if I'm going  to live into it I can get an FHA three  and a half percent down payment or I  could put a conventional five percent  down or if it was

non-owner occupied  like I'm not going to live here I'm but  I want to buy it and run it out I might  have to put 20 percent down  um the banking system is basically set  up to say we're really comfortable  issuing loans for real estate and that's  this residential game that we're talking  about right but that's part of the  problem why this arbitrary four doors or  fewer it should be a residentia

l  property is a property where people live  they have it as a residence and a  commercial property is where people  conduct Commerce so a five-door  apartment complex or a 500 door  apartment complex should be residential  you have the same limitations the one  year residential tenancy agreement the  fact that tenants will put their fists  through walls and then call you to fix  it I've never had

a commercial den and  do that in fact they tend to get their  places looking really good because they  earn their income there do you see what  he's doing right now he's undermining  the whole this is my slide I'm here to  talk about real estate and he's already  basically jabbing sayings that are Nina  your meter  because you're appealing to what people  think is the truth to Hoodwink them into

believing that this is great when in  actual fact we've got to stick to  reality a five unit apartment complex is  residential folks  okay Dolph this is  slide now you get you get that's the way  this works okay well it might be my  slide but it was done by Investopedia  and they say tenants are business owners  For Heaven's Sake the tenet of a  residential property could be a business  owner I t

hink what they're really saying  is that the tenant occupying commercial  space tends to run a commercial  Enterprise there that means his  objectives are different he earns his  money there he wants to have that place  looking good he wants it to be in a good  location he's got a vested interest to  having that place present really well I  love that aspect of commercial  all right let me continue

because you're  obviously just going to sit here and  wait for me hopefully to trip myself up  I'm waiting not at all there are so many  categories of commercial you've got  retail yes office but you've got  Hospitality hotels and motels you've got  airport facilities you've got rocket  launch pads and I was asked by the chief  pilot of Virgin Galactic to find their  rocket launch plan to get the

m into  space so if you want to get into space  you better be nice on this video the  number three here triple netley it's not  all commercial leases are triple net but  triple net means that in addition to  paying a base rent that pin the tenant  pays the outgoings of property taxes  insurance and maintenance you don't get  that on residential you as landlord pay  the property taxes insurance and

maintenance I love the fact that the  tenants willingly pay it it's the  industry Norm well at least on  Commercial compared to residential you  got to put down some fat down payments  check this one out Investopedia claims  that it requires more investor capital  and a lot more sophisticated  well I say to that abject BS because I  think it is not very easy in the  residential world to buy real

estate  without having any money usually you  need to come up with 20 as an investor  whereas time and time again we can buy  commercial real estate and pull money  out of the deal in fact if I'm not  mistaken someone at the beginning of  this video was boasting about a seven  million dollar property that I bought I  forget who it was right now remind me of  his name I forget who it was  a millio

n dollars out of the deal by  doing a commercial deal he has never  claimed with all his two billion dollars  worth of residing to real estate that  he's managed to do that  so I think the point is kind of made  [Applause]  all right valuations on these two types  of real estate are going to look  different for example on residential  valuation is determined by comparable  homes that recently sold

in the area so  for example if I wanted to buy a 350  000-ish home that is for sale in a  neighborhood and a lot of the other  homes recent you know recently in the  last six months nearby we're selling in  that 340 350 360 and then similar square  footage and similar bedrooms and  bathrooms I'd be like oh this home is  probably worth 350-ish thousand dollars  because that's what the other very

similar homes have sold for that's how  they usually decide the value of  something in residential it's what other  people have been willing to pay for  similar real estate I fully agree and  that's where it contrasts from  commercial real estate because  commercial they don't rely on comps a  commercial property is valued on the  basis of a multiple of its rental income  so if a property is gener

ating a hundred  thousand in rental income and it's a cap  rate so 10 that means that building is  valued at a million dollars but if you  and I can figure out a way of doubling  that rental income from a hundred  thousand to two hundred thousand by  changing the tenant for instance from a  thrift store to a coffee shop or  anything like that if the rental goes to  200 000 the value of the buildin

g goes  to 2 million the value of a commercial  building is a multiple of its rental  income that gives us the chance to use a  lot of creativity to increase the value  of the rental and therefore the value of  the building which is kind of  interesting because creativity over here  on this side actually enables you to  increase the value of something and  you're only limited by your own  creativi

ty on this side there's not that  much creativity there's a little here  there's a little there but there's also  a strength in that lack of creativity  because it becomes a little bit more of  a static known it's like if I bought  this thing 30 below Market I know it  because there's no creativity in really  determining what comps are for the most  part it's kind of set in stone so  they're total

ly different games from  each other but they both have a way of  increasing value no doubt on this side  of the fence if you get creative you can  get rewarded in really big ways  residential versus commercial now what  we're going to do is we're going to  evaluate cash flow this comes from  leverage.com and what they're going to  do is they're going to help us  understand the difference between

commercial and residential in terms of  lease risk and tenants I think this will  kind of like broaden out and give us a  bigger understanding of what is this  container in comparing these two Dolph  here on the lease are saying that  commercial leases are usually 5 to 15  years and that residential leases are  usually one year maybe a little higher  and there's going to be higher tenant  turnover

that is not inaccurate and I  would say I agree with them on that  point however that's not the full story  there are so many things we could  discuss about the leases on commercial  buildings and how they differ from the  leases on residential buildings that  again make commercials such an  attractive proposition yes it's true  that they tend to be longer in duration  but when you have a rent re

view the rent  on Commercial properties that's in most  commercial lease contracts standard  around the world that the rent can stay  the same or it can go up but it can not  go down it's called a ratchet clause and  I want to be really specific here  ratchet is one word not two words I know  some tenants probably think it's two  words but it means that it goes up but  not down that is great you d

on't have  that with residential and you might say  well that's that's totally unfair but  having a ratchet clause in commercial  leases enables landlords to offer lower  base rents than they otherwise would so  benefits everyone secondly if ever  someone wants to sell a business they  can sell the business to a new tenant  but the deal has to be approved by the  landlord it's called an assignment

of  lease document and it stipulates that  should the new incoming business owner  fail to pay the rent the old business  owner will continue to pay it I've never  had that on a residential property or an  outgoing tenant guarantees the rent for  me for the new incoming tenant not gonna  lie I think that's all pretty cool it's  like I get a tenant and let's say they  sign I've seen Amazon sign 30

-year deals  yes it's like wow I don't have to find a  new tenant never your ratchets up  however when you own commercial  depending on the size eyes of it you've  bitten off a big obligation and so if  you go an extended period of time  without a tenant what that does is that  can create some risk you see it's  typically easier to find Residential  tenants in the real estate game on  residential

however you don't have that  really so much on the commercial side on  the commercial side you better have line  someone up or I mean what's the longest  you've ever seen a building go vacant  where you've had to actually cover that  expense until you actually had someone  in there oh I thought you're going to  ask me what's the longest I've ever seen  a commercial building go vacant and yes  I fu

lly admit I've seen them vacant for  years but not ones that I've owned  because it's true that with residential  if you are not getting a tenant there's  only one problem guys it's not that the  color of the carpet in the spare bedroom  is wrong or the aspect of the window in  the kitchen when the Sun rises in the  morning and the wintertime relative to  whatever no it's just that the rent's  too

high drop it by a hundred a month  and you will get a tenant whereas with  commercial you might have dropped it by  50 and it's still vacant but you've got  to figure out ways of targeting  commercial tenants and we have an  18-step plan for getting a tenant that's  why why I never fear if you and I under  vacant Ugly Warehouse in the sea of  similarly vacant and ugly warehouses I  would not fret

because I'd know within a  month we'd have a tenant for our  warehouse and there's a specific formula  as to how we can do that and a willing  tenant by the way it's again what you  said before you can use your creativity  to come up with ideas that the other  commercial landlords don't just come up  with they just say oh I'm not managing  to get a tenant but they're not doing  anything about it

so I think this one is  debatable yeah and evidence can show  that you and I would find a tenant for a  vacant commercial space perfect the  third one here tenants commercial  properties have higher value tenants  they basically put everything on the  line and by the way they typically want  to do improvements on the property and  they're willing to actually pay more on  an increased basis over ti

me to have  basically have those tenant improvements  meanwhile in the game of Real Estate  it's different right I mean this person  is going to live there for one two or  three years and they're going to move on  and it's just a bit of a different game  it is a different game because most  visiting tenants aspire to one day own  their own home so in that basis you'll  never get a tenant forever w

hereas with  commercial it's very common that they  want to lease their properties they want  their Capital deployed in their business  not on their premises in fact I've often  bought a building from a company that  owns the building and the business and  they're all they want to divest  themselves of the building to put the  Surplus cash flow into their business so  yes you can get them for a lo

ng time and  I agree and I'm happy to report to  everyone that you just use number three  as an advantage of commercial thank you  you're very very welcome I can be fair  Dolph you make some really fine  arguments but we've got to also talk  about the reality of this financing is  it easier to get financing on  residential or commercial in general for  beginners it's much easier to get  financing

on visiting to properties  that's been my personal experience every  time I go and buy something commercial  it's if SBA is involved they want to do  all this it sometimes is a multi-month  process to go through correct um but in  the game of Real Estate this is what  banks do on a pretty regular basis and  they're used to it neither you will or  you won't qualify you're going to find  out pretty

quickly and reality is if you  have good credit and if you have good  job history and if you have the down  payment you're probably going to get a  loan and so it's a little bit of a  different game there I think on the real  estate side just be more accessible to  residential because it's just something  that more people can easily do whereas  commercial well you've said it it's  really a creativ

e game and there's  opportunities for a lot more commonplace  creativity even from a bank even when I  did my last loan I was surprised at like  how they underwrote my situation like  well we could do this we could Bridge  along that we can make this happen I'm  like wow I would never see anything at  all like that for a residential loan so  almost two different worlds it is two  different worlds

I fully agree when  you're starting out it is easier to get  a loan on a residential property than on  a commercial property having said that  once you have enough commercial  properties under the belt banks will buy  with each other to offer you the money  once they see that you can perform and  they you actually pay the mortgage  payment every month they want your  business  so dolphin all fairn

ess which is it is  it commercial is it residential which  one's better you know it depends on the  deal rather than say residential is  always better or commercial is always  better I look at both full disclosure  I've bought four houses this year and  I've turned them into vrbos that's doing  very well we're getting you know good  return on those and but I look at both  residential and Commercia

l and whatever  comes up that offers me a spectacular  deal especially if I don't need to put  any cash into it even more so if I can  pull cash out of it even more so if I've  got three or four banks vying with each  other they will endure them and they  will lend you the money if we give you a  commitment to give them the money now  will you give us a commitment to take  our money that's the sor

t of situation  you want I don't really care whether  it's commercial industrial Hospitality  you name it as long as it's real estate  you know I think one of the debates  that's really popular out there is this  idea that you start in residential and  then you graduate to Commercial and I  think from what I've learned from you  and just my own personal experience is I  don't think it's a chronolo

gy of  graduation I think it is really more  about first of all what is your own  temperament like what do you personally  enjoy I feel like often the success of  an investor is not the strategy or  technique but how they feel about it you  know if you've ever gone into any type  of financial game with a low degree of  confidence or with worry or with fear  you're probably going to eventually give

up on that because you're not going to  have the motivation that you need  similarly if you find the right strategy  that excites you and you can see Dolph  has an incredible amount of passion for  commercial I've got an incredible  impassion for residential in reality as  we cross-pollinate we do some and a lot  of both I think it really is about  Different Strokes for different people  you got

to be honest with yourself and  what you really want and I think you  should be aware there's major winning in  both games and part of that is your  definition of what winning is when I was  young and 21 buying 25 single-family  homes paying me 12 Grand a month was  winning because it got me out of my job  and that worked I don't know if had I  not had a mentor like you if I would  have actually

been able to achieve that  in commercial today obviously I know  that I could have but that's really all  I had access to at that time so I'm very  very grateful for that experience  thousands and thousands of homes ago and  yet I'm loving the game of commercial  right today more than ever before it's a  fun game it's an exciting game because  that creativity can yield really high  rois I fully ag

ree and if you like this  creative process which you obviously do  and you're great at it I think it's a  great Outlet I had a premise that was  vacant and I always thought it would  make a great coffee shop and who would  have thought that coffee shops would  take of an America if 40 years ago or  whatever it was when Starbucks first  came around if you said let's invest in  a company that'll hav

e coffee stores on  every corner I would have said no  there's not enough demand but anyway I  thought this premise would be great it's  a coffee shop I Advertiser to find a  tenant and I couldn't get one and after  three months I thought well either I'm  wrong it's not a good location for a  coffee shop or people don't have  foresight so what I decided to do is to  create the coffee shop I bought

the  furniture the Crockery The Cutlery the  Barista machine and got the staff in and  trained them up and I was the chief  quality control officer if you like and  then after three months I had a really  good functioning coffee shop which I saw  old and I made a profit on the sale  about ten thousand dollars relative to  what I'd spent but it wasn't about  making that profit I created a lease a

five-year lease with two rates of  renewal for five years and that is what  generated my Revenue that's where my  value came from but I had fun in the  process if something like that is fun  for you you'll be great at Commercial  Real Estate if on the other hand it's a  burden and you'd rather invest in  residential or do any other kind of  investment activity then do what fires  you up you want

something that when you  wake up them on you say yeah I can't  wait to get out of bed because I want to  finish this coffee shop around to create  that or do this that's what keeps us  going  Dolph you make so many amazing good  points and I want to tell y'all  something right now I love this man he  is my original real estate mentor and  I'm inviting you in the link below to  access his social me

dia and start  following him and learning from him  because it continues to be a benefit to  me additionally if you want to learn how  to get in the game of residential real  estate if you're like after watching  this video Chris I love that you can  consistently produce let's call it a 34  Roi compound that on a regular basis and  over time take a little bit amount of  money and turn it into a lo

t of money  and have it be completely passive then  this might be something for you to look  into partnering with me is usually where  someone has somebody sitting in a 401k  and Ira they want to be passive they see  my track record on my last two billion  dollars of real estate holdings and they  say I want those rois and if you want to  access them click the link below fill  out the information

go through a  qualification process not everyone's a  good fit to partner with me because if  we do this and if we're long-term  Partners I'm here to do my part to help  you become a Mega multi-millionaire in  the game that compounds and creates a  legacy for future generations and so  click that link and let's connect  so Dolph is it commercial or is it  residential it's both okay that's the  hon

est answer right yes and it depends  on you and your temperament and most  people if I had to look at their  financial situation and say where are  they financially sinning it's that they  don't have the diversification that they  really need so we're going to talk a  little bit about diversification in this  next video not just residential not just  commercial but all the other things that  you really should be considering with  your hard-earned money

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