How do you learn commercial markets?

Question

With residential it’s pretty easy to follow sales and develop an understanding of markets. Commercial seems much more difficult to find the comparable data. I don’t want to use a broker’s time yet because I’m just looking to educate myself. What’s the best way to start understanding what things sell for, rent for etc in the commercial world?

Don-Carlos Moniz · Answer

@James York,

If you are talking about multifamily - it is not much different than residential.  I use CoStar for a lot of my initial research, but it is not the only tool available.  I don't think there is a perfect tool, so you have to find what works for you.

Don't get stuck on any one metric.  Spend a little time understanding the pros and cons of different market and asset measures.  A lot of folks fixate on cap rates and end up ruling out good investments.  Others will focus solely on current cash flow without consideration of future value.  I could go on, but I am sure you get the idea.

When you see a property come to market, reach out to the listing broker and get the financials.  Most will require you to sign a confidentiality agreement before they release the information.

Don't hesitate to reach out to commercial brokers in your research area.  Good ones will have no problem jumping on a quick call and answering some questions.  If you offer to buy them a cup of coffee, you can probably get an hour of their time.  Just don't waste their time - have some questions ready.  I am always looking for an excuse to drink a free cup of coffee and talk real estate.

Don

Account Closed · Answer

Underwrite 200 deals in your market and you will know as much as, if not more, than the most brokers. Once you start underwriting deals, you will start to understand the kind of questions you need to ask to learn the asset class and market.

Scott Mac · Answer

Commercial--such a big universe of things.

Maybe think about what you want to do in a more specific manner.

[1] Rehab/refurbish, 7/11 size strip malls, vs. Target size strip malls, or office space, or NNN, or Pads, or etc...

Or are you talking about things like a stand alone building with a hair salon, or similar in it along side of a major road.

[2] What can you afford to do Down-payment-wise, in an MMA maybe only a 7/11 strip mall, in a medium sized area maybe a larger bite of the chocolate bar than the 7/11 mall.

[3] Do you want partners on deals, (same on all, different on some), must you have partners on deals (loan qualifications, personal weak spots, etc...)

[4] How will you swing the bat at financing; do you qualify for the financing your deals will need, will you need others to help you qualify, do you now these people vs risking someone who will make your life miserable and you will hate working with (an unfortunate situation).

[5] Do you want to work government handout money for fix up real estate, is there any that looks profitable right now.

[6] How well do you know commercial real estate "Stuff"; such as can you identify a 400 amp service panel from an 800 amp service panel, can you identify an electrical transformer that you own from those owned by the utility, what is a plenum, does your building have them, what are those big red pipes with wheel handles on them, hidden behind the bushes (who do they belong to), how long does asphalt last in a commercial lot, and etc...

Good Luck!

Scott Wolf · Answer

@James York, a lot of the larger commercial shops also put out market data in bigger metro areas.  JLL, CBRE, Cushman, etc.  You can find that information under research on their websites.

Joshua Lappin · Answer

There are some decent REI virtual meet ups that frequently discuss the topic of commercial real estate.  They can be found on meetup.com

1. https://www.meetup.com/real-estate-wealth-philly/

2. https://www.meetup.com/The-Charlotte-Metrolina-Real-Estate-Investors-Association/

Henry Clark · Answer

@James York

Google loopnet or crexi commercial for charlotte. Pick a property that is close to your idea. This will help folks to give you better suggestions

James York · Answer

@Henry Clark outside Charlotte NC

Henry Clark · Answer

@James York  What town are you in or near?

Emma Powell · Answer

The way I learned it was to try to do deals up to the point I had to put money in: if they still had legs at that point, and I had the people on the team I needed, I'd send the money and take it on. If not, I'd move on. I spent a lot of time calling for sale by owner on Crexi and Loopnet to talk to the owners, they we eager to tell me all about their property and the business.

for paid options, the broadest course I've seen is Scott Scheel Commercial Academy. Good details on all types of commercial RE investing, things I'd never even heard of despite being in the space a couple of years at that point. I didn't join the inner circle, but enjoyed the conferences, course materials, and networking.

I've since started a free commercial real estate investing club where we co-GP on deals as joint venture partners because I found there's a ton of paid education out there, but people still aren't doing deals. We function under the Investing Club as far as SEC regulations go, and have closed 4 deals with experienced operators as club partners this year. Learn by doing.

Sergey A. Petrov · Answer

If you are serious about getting into commercial, call a few commercial brokers, tell them what you are looking for generally and ask them to keep you on their “buyer list”. Most of commercial deals are off market, word of mouth, and personal business connections. You’ll start seeing deals come your way and start learning and evaluating from there.

How do you learn commercial markets?

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