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!
Related Websites -
Do You Need A Real Estate Agent? Real Estate business has seen tremendous growth and so has been the need of Real Estate agent. Today more and more people are getting interested to become home owner and as the demand for real estate need increases the role of Real Estate Agent becomes more important. In the...... -
How to Buy Very Cheap Property If you're in a situation that is similar to many of us out there, in this current economic climate, any property you buy is going to have be a very cheap property. This is the case regardless of whether you're a seasoned property investor, or just a smarter than average...... - How to select a Property Manager I'm not too thrilled with my property manager on the 2 houses I bought in Indiana. Since I did such a lousy job the first time around, I guess I need to pull out the old books and see how to choose a better one. Who better to find a......
-
How To Invest In Real Estate With No Money Down Do you want to invest in the real estate business and the only thing that is stopping you from starting this venture is your inability to generate the necessary amount of cash or financing? There are ways available for investing in real estate with little or no down money. You...... -
6 Tips to Take Your Real Estate Investing to the Next Level Taking your real estate investment business to the next level means going into territory you haven't gone before to reap rewards you haven't yet obtained. I know a lot of people who do the same types of deals they did when they first started in real estate investing. Now there's......
{ 4 comments… read them below or add one }
Jayme talked about Debt Service Coverage Ratio. She said debt service needs to be 1.3 ratio to operating income. Example $10,000 per month =$120,000 per year. Then the figure of $156,00 =1.3. What does the $156,000 represent? I know i’m missing something simple.Dave
I missed something on the call. This is a list of “tools”. What do you mean “tools”? How do I use them? Are they national Commercial Real Estate Brokers? Are they a clearing house for deals? Developers? What do they do? Are you saying to watch for where they are buying and I’ll know where business is growing?
“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”
Hey Dave! I forwarded your question to Jayme for an answer and will post it up for you as soon as I hear back from her. Cheers, Roland
Hi Ann! The “tools” that you’re referring to are website links to help you find info, brokers and deals. They are national commercial real estate brokers. Jayme goes into a LOT of detail about how to use these tools in the workshop, but did not have time to do much more than let you know the basics about them on the call. Hope that helps! Cheers, Roland
You must log in to post a comment.