Are you wondering how to go about finding your first commercial real estate investment? There are lots of options out there, but you definitely should not be throwing your money into just any property. If you’re not sure where to begin, that is perfectly fine. We’ve compiled some tips in this article so you can get started on finding your first commercial property.
Who you should be buying from.
Motivated sellers. You want to find sellers who have a strong desire to sell their property – the faster the better too. If you are dealing with a seller who doesn’t have a strong urge to sell, then you’ll have less bargaining power. Essentially, they won’t be as motivated to negotiate with you and release the property from their control. Now that doesn’t sound like something we want as an investor, right? Making a profitable investment starts with getting a good deal, so make sure you find sellers who may be more willing to provide one.
How to find motivated sellers.
There are many approaches you can take to finding these sellers. The best way is to get out there and meet them. But how can you identify sellers? We recommend the following activities to help you get started.
Browse online. As with anything, most research processes start on the Internet. There are tons of commercial property listings online, you just need to go and find them.
Search the classified ads. Finding yourself a newspaper and flipping to the ads section is always a good idea. You never know what you’re going to find. It’d be a shame to miss out on a promising opportunity by ruling out the traditional newspaper.
Find a bird dog for your team. No, we don’t mean go and buy a dog that will retrieve birds for you when hunting. Instead, this is an expert in the real estate market who will help you to locate motivated sellers and potential investment opportunities. Generally, they will charge a fee when they find you a deal that you close. It is definitely worth the fee as these people will know the ins and outs of particular neighborhoods, as well as understand what to look for in a property.
Be ready with an action plan.
Not having a clear plan of action is almost always a recipe for disaster. This is definitely not something you want to do with so much money on the line. Here’s how you can prepare yourself.
Know your budget. You should always have a range that you are expecting to spend within. This will help to ensure that you can afford the financing, as well as meet interest payments and other expenses as they come due.
Have clear profit goals. Surely you want to make a return, but how much? This is important as it will help you to assess whether a particular deal meets your needs.
Be ready with an exit strategy. It’s good to know how you will invest your money, but it’s also important to think about how you will capitalize on your investment.
Understand the logistics. You should have an understanding of how you will actually meet your goals. For example, how many units will you be renting in total and for how much? What is the minimum number of units you must rent to meet your investment objectives? Are there any tenants already locked in?
And of course, you need to know what the property is worth. One technique you can get familiar with is called neighborhood farming. This will help you to determine a property’s relative value based on its surrounding neighborhood. It means getting a better idea about the value per square footage of a building. You’ll need to get out to view properties and talk to other commercial property owners in the area.
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