Commercial Real Estate as a Rookie?

[Steve Uekert]

Hello everyone!

As I continue to absorb as much information as I can, I find myself with more questions than answers (which is normal I guess). I also find myself trying to narrow my focus down a bit to a specific type of investing that I might want to begin with as we get closer to starting our real estate adventure.

As I've shifted from STR's, to LTR's and now more recently into multi-family investments, I've begun thinking about commercial. Just to be transparent, I've just started looking into commercial, so I know almost nothing yet (but trying to learn and read as much as I can).

I know commercial properties tend to have a higher possibility of greater cash flow, but also seem to cost significantly more to get into.

Which got me thinking, if a person wanted to begin the foray into commercial investing, what are some of the options you'd look at that seem to have a lower barrier to entry (obviously this is subjective)?

Small office buildings? Hotels? Retail space? Etc.

Or, is commercial real estate something a rookie should avoid?

Sorry for all the high level questions, I'm just looking to starting filling in the blanks of everything I don't know. Once I know a bit more of what I don't know, then I'll know more questions to ask LOL. 

Thank you all very much for any insight you're willing to share!

Steve

[Tyler Fontaine]

Fair question. Lots of avenues in RE to make money. I can see why you are exploring all options.

Ill start with no matter what, just make sure you execute. Don't be stuck in analysis paralysis. Eventually you just have to pull the trigger, jump in the deep end, and get started. 

Now, I will say there is a lot of nuance that comes with RE but especially the commercial space. One place to start is to decide if you want to do residential commercial, retail, mix use, and so on. Plus and minuses with all of them.

Then I would be sure to get a realtor who specifically works with commercial. Same thing for your lender. The contracts are different, the funding infrastructure is different, how the asset is valued is different. You want to build your "team" with people who are niched into this and don't just do it casually for a paycheck.

Next, I would say you are correct. The barrier to entry into to commercial is much higher. You can only get into a deal in a few ways. Bring the deal to the table, fund the deal, have the knowledge to guide the deal, or be the person who quarterbacks it and makes sure all the parties involved are doing their parts. You could look in your local area and see if you can intern/work for free/get an entry level position with someone who already is actively having success investing in commercial. This way you can earn your stripes, learn, and potentially build seed money/relationships needed to get into a deal yourself and get a piece of the action.
 

Personally I started with a house hack to lower my expenses. Now I graduated to flipping houses. We will use the proceeds from the flips to build seed money to get some more residential rentals so that my expenses for my personal life goes to zero. The next step will be to trade in our portfolio into a larger resi commercial building or to use the money to simply buy additional units to add to the portfolio. 

Im a realtor, I work at a property management company, I have network of commercial/residential/private lenders, a list of contractors, a phone book of other investors who are doing the same things we are, a couple good attorneys, a book keeper, and a killer accountant. This took time to build these relationships but the machine if you will has been built to be able to take on much larger deals in the near future once we stack some more capital to invest with. I think building your network so you can have the ability to execute properly is the number one priority other than getting the money to make a move.