Commercial Investing IS Within Your Reach! | How To Go For It
For many residential real estate investors, transitioning into the commercial realm doesn’t seem to make sense. Either investors just feel comfortable with their current residential strategy, or the barriers to entering the commercial real estate world just seem too large.
If you’re worried about making the jump into commercial real estate, don’t be! Considering the tremendous advantages of commercial investing, making your first commercial deal is worth the effort - and absolutely within your reach.
In this article, I’ll explain how investing in commercial real estate doesn’t have to be as difficult as people make it out to be. Specifically, I’ll dive into the below topics:
● Understanding What Makes Commercial Real Estate Unique
● The Importance of a Solid Team
● It’s Not As Challenging As You Think!
Understanding What Makes Commercial Real Estate Unique
The first step to entering the commercial real estate world involves its differences. In other words, once investors understand what differentiates residential and commercial real estate investing, transitioning from the former into the latter becomes a far easier undertaking.
Commercial real estate primarily differs from its residential counterpart due to the larger pool of available niches. Put simply, a commercial real estate niche is a combination of an investor’s preferred A) development strategy, B) asset class, and C) market.
Broadly speaking, the following five commercial real estate investing strategies exist, each of which has its associated advantages and disadvantages:
● Traditional development
● Commercial BRRRR (a.k.a. value-add)
● Long-term buy and hold
● Owner-occupied properties
● The land-bank model
After determining their particular strategy, investors need to determine an asset class, that is, a type of commercial property. Six categories fall under the umbrella of commercial real estate, and each of these includes a variety of sub-categories, as well:
● Multi-family
● Office Space
● Industrial
● Medical
● Hospitality
● Retail
Finally, commercial real estate investors need to consider their geographic market. This may be pre-determined, as some investors only want to invest in properties where they live. Or, some investors choose a remote location based on some positive characteristics (e.g. better access to transportation infrastructure, macroeconomic trends, local industries, etc).
Local commercial real estate professionals can help you determine the best property type and investment strategy for your market and unique situation - need help finding reliable ones in your area? Drop us a note!
The Importance of a Solid Team
While the above differences may seem overwhelming, surrounding yourself with an outstanding team will give you all the tools you need to analyze and invest in the best commercial deals for your situation.
I’ll cover a more comprehensive list of players below, but the following three core individuals will help guarantee the success of a commercial deal, regardless of your experience level.
● Commercial real estate broker: These professionals are absolute subject-matter experts in their local market. They’ll be able to recommend the best strategies, asset types, and neighborhoods to support your specific goals.
● Commercial mortgage broker: While differences exist between residential (i.e. personal) and commercial lending, a commercial mortgage broker will A) walk you through these differences, and B) help you find the best loan products for a particular deal.
● Commercial real estate attorney: Commercial due diligence requirements (e.g. zoning considerations, title, easements, etc) can quickly overwhelm new investors. Commercial real estate attorneys are paid to be absolute due diligence experts! Working with a good one will provide you the peace of mind that you’ve “crossed all the T’s and dotted all the I’s” of a deal.
And, while not an exhaustive list, here are some of the other team members necessary to a successful commercial real estate deal. But, it’s important to note that, by working with a commercial real estate broker, you’ll have access to a pre-vetted list of candidates for each of the following positions:
● Developer
● Project manager
● General contractor
● Architect and engineer
● Commercial insurance broker
● Sales and leasing representatives
● Property manager
An outstanding team makes all the difference in a commercial real estate deal, so please drop us a note for help putting one together.
It’s Not As Challenging As You Think!
That’s really all there is to it. While it would take years of experience to personally fulfill the responsibilities of each of the above team members (if possible, at all), assembling a solid team of commercial real estate professionals allows new investors to dive into their first deals.
I’m certainly not advocating not doing your own research and going into a deal blind. But, doing some background reading to gain a deeper understanding of the fundamentals of commercial real estate will allow you the big picture perspective to put together a core team of professionals for your first deal.
Bottom line, if you choose to remain a residential investor because you just prefer that approach, that’s fine. Just don’t let anxiety prevent you from moving into commercial real estate, as it’s not as challenging as you think!
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We recognize that, even after outlining the above information, investing in commercial real estate can seem daunting.
That’s why we’re here to help. The Pocket Broker team lives and breathes commercial real estate, so drop us a note to see how we can help you achieve your unique objectives!