Hawaii Commercial Investment Properties versus Hawaii Residential Investment Properties

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	HAWAII INTERNATIONAL REAL ESTATE, LLC
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This site compares Commercial Real Estate versus Residential Real Estate as investment. For investors thinking of expanding into commercial real estate investment.

Owing Commercial Real Estate is a proven path to outrageous personal wealth. Contact me to know how you can start investing in Commercial Real Estate and get wealthy. I will "run" for you the numbers, assist you in finding the right type of commercial property, inspect property with you, and acquire any kind of commercial properties with you. Generally speaking, residential property is a living space which include apartments, duplexes, homes, and condominiums. The four main types of commercial real estate are office space, industrial, multi-family (multi-apartment buildings) and retail properties. Another type of commercial property is a hotel-motel or mobile home parks which don't find any application in Hawaii. All these are the primary commercial properties that investors might consider to invest in.

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Easier and cheaper to manage. Fact is, commercial tenants pay insurance, taxes, maintenance fee and utilities.
Better tenants: Many commercial tenants will make tens of thousands of dollars in improvements to your property without batting an eyelash or asking you a dime. Find out who they are.
Longer leases: Businesses have a vested interest in keeping their address. Why find a tenant for 12 months, when you can get one for 12 years or longer with less effort.

Myth: Commercial real estate is too expensive.

Reality: It can be the best bargain in real estate. Fact is, it can cost no more out of your pocket to acquire a commercial property than to buy a house.

Myth: Commercial real estate is too complicated.

Reality: It can be easy. Buying your first commercial property can be no more complicated than buying your first home. Perhaps even less complicated, because you will know the right way to go about it.

Some differences between Commercial Real Estate and Residential Real Estate

In Residential Real Estate most homes are occupied by their owners while all Commercial Properties are potentially income-producing.
Commercial Real Estate transactions can be much more diverse and wide-ranging than selling a home.
The risk and potential liability exposure you face on a Commercial Real Estate deal can be much greater than buying a home. Commercial Real Estate buyers must also consider another factors to take in consideration like hazardous materials and zoning laws, as well as whether the location is suitable for your business.
Commercial Real Estate Property is also not given the same consumer protections as a Residential Real Estate deal.
The mandatory disclosures required in Residential Real Estate deals may or may not be required in a Commercial Transaction, depending on the area and a property type.
There are greater protections in place for Residential Buyers than for Commercial Real Estate deals.

Myth: Commercial real estate is too volatile.

Reality: History shows it cash be much more stable than investing in houses, especially in the market we're in today, PLUS get property value appreciation, tax benefits, and higher income.

Myth: Commercial real estate is too time-consuming

Reality: It can be effortless to manage. The secret is to a team in place that manages your property. And the best part is, your tenants pay for your team service. So, it can cost you nothing out of pocket.

Myth: Only the rich can afford commercial real estate

Reality: Commercial property makes you rich, but you don't need to be loaded with cash to get started.

Factors to be considered investing in Commercial Real Estate

Why demand for Commercial Real Estate will be always high?

How much do you have to invest?
Does the property needs revitalization?
What is your investment goal: long term investment or short-term investment to flip the property over?
How far do you live from potential investment?
Are you buying from developer (primary market) or you are buying completed unit (secondary market)?

Hawaii commercial investment faces bleak year

The Population grows, the demand for multi-family housing units, storage spaces, offices, warehouses, parking lots etc. grows proportionately. In is estimated that the population of the U.S. could double within the next 50 years.

Commercial real estate investment in Hawaii is predicted to fall to levels unseen since the mid-1990s because of the poor economy and lack of available capital, according to a new report.

Sales volume for investment properties will fall to $525 million in 2009, a third less than 2008. That figure doesn’t include properties that changed hands because of defaults or foreclosures.

Moody’s: Honolulu commercial real estate market 4th in Nation

Honolulu’s commercial real estate market is among the top five in the nation, according to a new report. The area’s commercial real estate market ranked fourth among major metropolitan areas in the country in the fourth quarter of last year, according to a recent report from credit rating agency Moody’s Investors Service. The report, which focused on the office, apartment and hospitality markets, gave Honolulu an overall average score of 72 out of 100 based on vacancy rates and other factors. Pittsburgh ranked first in the report, scoring a 77 out of 100. Oklahoma City, 74, San Francisco, 74, Honolulu, 72, and Los Angeles, 68, rounded out the top five markets.

Riverside, Calif., 36, Jacksonville, 33, Trenton, N.J., 33, Detroit, 26, and Phoenix, 24, were the lowest scoring markets.

Factors to be considered investing in Commercial Property

Factors	Factors' Description
Property-Specific	Capitalization Rate, Cash-on-Cash Return
Property-Specific	Cash Flow
Market Analysis (district, neighborhood or region)	Long term evolution of a geographic area and demographics
Investor-Specific	Tax shelter and investor's financing benefits

It also doesn’t include sales where the buyer assumes existing financing, the report said.

The total number of commercial investment transactions in Hawaii of $1 million or more for 2008 was 166, a 38 percent drop from the 269 sales recorded in 2007.

The decline in sales volume was even steeper. The $788 million in total commercial real estate volume for 2008 represented a 74 percent drop from 2007’s $3.04 billion volume. The 2008 figure also represented an 82 percent decline from the record $4.3 billion in volume set in 2005.......

Residential Property Financing versus Commercial Property Financing (Source: www.carletonsheets.com)
Process	Residential Property	Commercial Property
Acquisition	Most residential properties are purchased because buyers fall in love with the property they will be calling home. The requirements for purchasing residential real estate are much less stringent than the requirements for purchasing commercial real estate. Residential real estate purchases are based on the buyer’s personal credit scores and their debt-to-income ratio (DTI). Lenders will lend to buyers if their DTI is below a certain percentage which is usually 45 percent or less. Buyers who have lower credit scores can still obtain financing if they have a larger down payment. Once the buyer meets the lender’s requirements s/he will qualify for financing and purchase the residential property. Lenders have no problem with lending to first-time investors for the purchase of a residential property as long as the lending requirements are met.	Commercial properties are purchased based on financial calculations such as cap rate, cash flow, and cash-on-cash return, and revenues it will potentially earn for the owner. he purchase of commercial property is a more complex transaction. Most commercial properties are purchased with non-recourse loans which means, if the buyer fails to make payments, the lender is not able to pursue the buyer personally in collection of the monies owed. For this reason credit scores and DTI are not criteria used in the purchase of commercial properties. Instead lending on commercial properties is based on the potential cash flow, cap rate, and net operating income (NOI) generated by the property. Whereas first-time investors will have difficulty buying a commercial property as lenders are reticent to lend to someone with no experience. Generally commercial loans require one of the primary applicants to have experience dealing with the type of property being purchased.
Disposition	Sales of residential properties can occur in as little as a few hours, but in Hawaii the average time to close is approximately one and a half month (45 days).	Commercial properties can easily take a few months to over a year to close. The potential profit from a commercial property sale is much greater than a sale on residential property. The old adage of higher risks potentially bringing higher rewards is the driving principle behind this reality. Most investors begin their careers investing in residential real estate and then move into commercial real estate after several years of successful investing.

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