The 10 Secrets to Successful Commercial Real Estate Investing

Hint: The real secret is that there are no secrets...

The fact of the matter is, there is no secret, no hidden recipe for success. What works for one investor might not, and often won't, work for another.

Investing in commercial real estate, as it turns out, is very personal. I don't mean that investors should fall in love with their properties, just the opposite, but each of us has different likes and dislikes. Some just love personal interaction and gravitate to investments that allow them to meet and work with diverse people; apartment buildings for example. Others really enjoy the chase and like to invest in single tenant retail properties where there's a lot more involved in getting that big tenant that can make or break an investment property's future.

What it really boils down to is careful consideration of your aptitudes and extreme due diligence.

1. What kind of personal interactions do you enjoy?

2. What kinds of property get you excited? The answers to these first two questions will guide you to the right type of property to look for.

3. Decide on an investment goal or series of goals. What kind of return do you expect? What size of real estate empire do you plan to build?

4. Look for a market, not a building. What does that mean? Don't find a product before you find a market that is demanding it. Take a look at the geographical area that you'd like to invest in and find out what's hot, what part of the real estate market is growing and in demand and look for properties that can fill that need.

5. Look for properties with 'upside'. What's upside? Opportunity! Properties that have tenants that are paying below market rents, properties that need a facelift, vacant buildings are great if you have a relationship with tenants and can fill them quickly, properties with excess land that can be developed, etc. The list is endless and only limited by your creativity and market demand.

6. Do a thorough analysis of any properties that appear to meet your investment criteria to ensure that you'll be able to meet or exceed your goals.

7. Get professional assitance when necessary. You should consider using the services of a commercial REALTOR®, these people know the market and they know the players. They are generally compensated by the property sellers, so, in most cases, these services won't cost a thing. Always, and I mean always, consult a lawyer before you commit yourself to a deal. Consult an accountant before you commit to a long term strategy of investing. Hire inspectors and contractors to give you an idea of the physical soundness of a building before you buy it. Don't forget the evironmental engineers - a large number of commercial properties will need environmental assessments prior to securing financing.

8. Develop a good relationship with your source of funds. Financing isn't just challenging in 2009, it's always challenging. Get to know what your financier likes to see in a property proposal and provide it. Don't try to get fancy and don't try to convince them that 'this time it'll work'. Just the facts with a coating of opportunity.

9. Be persistent. You'll have to look at a lot of real estate before you finally get to do a deal that works. Robert Kiyosaki is probably pretty close to the truth when he says, you'll have to look at 100 properties, make offers on 10 of them, attempt to finance 3 of them and finally buy 1.

10. Don't fall in love with a piece of real estate! There will always be another deal, another property to pursue. Do not, and I can't stress this enough, DO NOT fall in love with the idea of investing so wholeheartedly that you buy the first property to come along. There are always great properties, but not all of them are right for your particular investment needs. If you feel like you have to shoe-horn it into your criteria, you should probably be moving on to the next one.

See? Nothing fancy, nothing far out. Simple, good old fashioned hard work and a clear set of goals and expectations will get you further ahead than any slick systems the 'guru's might want to sell you or any so-called 'secrets'.

Want to bounce around some ideas? Drop me a line, I'm always happy to help.

6 comments:

CoachingByPeter August 10, 2009 at 9:53 PM  

Many investors have strong feelings about real estate either for or against. It's better to stay only in those markets that are liquid that are easy to understand and deal with, and that offer an attractive compromise between risk and reward.

Jane August 11, 2009 at 2:53 AM  

Great points to consider you have here. Thanks for sharing. Keep up the good blogging. By the way, I know a great Kentucky home that might interest you too. Thanks.

Doug Lytle August 11, 2009 at 9:01 AM  

CoachingByPeter:
I agree, you really do need to stay within your comfort zone of investing. That said, once you've decided on a direction, sometimes stretching a bit and making yourself a little uncomfortable is the only way to really grow and prosper. I think this is true whether you invest in real estate, collectibles or stocks and bonds. Thanks for reading and taking the time to share your thoughts.

Doug Lytle August 11, 2009 at 9:02 AM  

Thanks for the pat on the back Jane! And thanks for reading. I'm in Ontario, Canada, so I don't think a home in Kentucky is going to be of much use though...

Adamina August 18, 2009 at 3:30 AM  

Nice Post. Your information will be useful to people who like to know about commercial real estate market investing tips. The new comers of real estate market can learn secrets and tricks from experts. Books, CDROM course and training course in online are available to get valuable information about commercial real estate market. To escape from recession, real estate marketers have to know about secrets of investing in commercial real estate market.

Commercial Real Estate Investors Blueprint

Doug Lytle August 18, 2009 at 10:23 AM  

Adamina, I try to write something useful whenever I can; thanks for dropping by.

To all of my readers: I appreciate the comments and feedback; please be aware that I do have a comment policy and spam is not permitted. A link to your personal page or email address is permitted but I'd prefer you did not link to sites set up purely to sell products. Please see the policy here: http://tinyurl.com/mowyz2 I have not been strictly enforcing this to date, but I reserve the right to do so.

Thanks!

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