How To Find Commercial Property & Paper Deals

Okay, so you’ve decided that you want to add some commercial property and paper deals to your residential real estate investing mix. That’s a great decision, and it makes a lot of sense, because commercial deals are huge potential money makers, but they don’t come along as dependably and frequently as residential deals.

So, you need to keep your bread and butter cash flow helper residential deals too. Don’t forget that – keep up your marketing, funding, wholesaling and equity building activities with residential property and paper, AND add commercial to the mix. Don’t just forget about your residential deals as you begin to explore commercial.

Now that we have that attitude adjustment in place, let’s talk about how you can go about finding commercial deals…

TYPES OF COMMERCIAL PROPERTY & PAPER

First, let’s talk about what a commercial deal actually is:

There are several types of commercial properties and their accompanying paper, and they include:

1. Retail & mixed use
2. Multifamily-apartments
3. Industrial-office warehouse
4. Office
5. Hotel-flagged
6. Healthcare
7. Raw Land

MARKETING PROGRAMS YOU NEED TO IMPLETMENT TO FIND COMMERCIAL DEALS

The best way to find commercial property and paper is to know what to look for. You should target commercial properties you identify as being in any of the following situations…

1. Distressed property
2. Vacant properties (or those with high vacancy indicating a low value and a high capitalization rate)
3. Bank workout department controlled properties (aka Special Asset Department)
4. Pre-foreclosure properties
5. Tax Lien properties – indication owner is having financial difficulty

Where To Look For Good Commercial Property & Paper Deals

And, where should you look to find good potential commercial property and paper deals in these situations?

1. The Internet – loopnet.com & others
2. Attorneys
3. Letter campaigns
4. Government sources- IRS, DEA
5. Commercial Realtors – Specialty brokers
6. Networking – non real estate focused networking business groups

DIFFERENT TYPES OF COMMERCIAL PAPER

Paper is backed by collateral.  That determines what type paper it is.

1. Permanent Loan
2. Bridge or Mezzanine Financing – usually second lien with partnership interest
3. Construction Loan
4. Second lien (not worth paper it’s written on) Can be a hard second or soft second not filed against property but have partnership interest.

HOW TO FIND COMMERCIAL PAPER

1. Small to medium sized banks
2. Hard money lenders

BEST FORMATS OF GETTING IN TOUCH WITH COMMERCIAL BROKERS AND HOW TO GET THEIR ATTENTION:
Tell them you are a principal looking for ___________. You want to set up time to meet to go over parameters.

1. Dollar amount
2. Number of units
3. Location
4. Be specific

MISTAKES TO AVOID THAT ARE GUARANTEED TO GIVE YOU AWAY AS A KNOW NOTHING NEWBIE

Number 1 – Failing To Know the LINGO
1. Triple net lease – tenant pays for everything
2. Double net
3. Gross rents & Vacancy
4. Price per square foot
5. # Square foot in acre
6. Capitalization rate – assuming all cash investment
7. NOI – net operating income
8. ROI – return on investment
9. Debt service coverage ratio
10. Variable costs
11. Fixed costs

BEST TOOLS FOR INDENTIFYING POTENTIAL DEALS IN YOUR FINDING AND MARKETING PROGRAM:

1. Marcus Millichap
2. Hendricks & partners
3. CB Richard Ellis
4. Henry S. Miller

Smaller spaces benefit from big boys moving in area.  Shadow anchored retail (Wal-Mart).  Check your local business journal for industry changes.

These are just a few tips and hints on commercial property and how to find it. I hope to see you at the workshop!

Click Here To Register For The Commercial Workshop or Call 800-614-8040!

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