insight into baby steps?

Question

Outside of running your own rental and having some cash available. What would you say is the very first step in getting started in commercial real estate (i.e. multifamily or triple net)? It seems like it's a whole other world. Where do you start to build contacts?

Kristi Kandel · Answer

Start by networking with the development team professionals in your local market. Developer: in charge of the entire process Partners: Strategic Partners understand the market & are a general partner in the dealFinancing & Funding: debt & equity partners Legal: all contracts, leases, closingsBroker: site & tenant acquisitionCommunity (AHJ): zoning, building permits, inspections, business license - help ensure the project complies with zoning regulations & will be a benefit to the communityDesign & ConstructionDesign TeamArchitectStructural EngineerMechanical/Plumbing/Electrical (MEP) Engineer Civil EngineerLandscape ArchitectManagement Project Management through construction completionProperty Management throughout the lifetime of owning the asset

Henry Clark · Answer

Contacts. You add them as you go. Make a list of positions or functions and seek out or add as you meet them. You will already know most of them as an Electrician in a smaller town. Surveyor, zoning, planning, permit, trades people, banker, insurance, attorney, security systems, etc. Keep adding as you go.As far as getting into CRE. There are many types and avenues. Bowling alley, MFH, storage, medical plaza, etc. I would look at your area first. Looks like a great town and area. Would look at several types of CRE before getting into detail.Pick an example and start doing deal analysis. You will learn CRE that way.Don’t worry about size and dollars for now. Learn the concepts. a. Do a subdivision development. Look at Old Knoxville. 27 acres for sale $1,600,000. b. Middle Creek road 23.4 acres, $1,800,000. c. Cargo containers. STR in rec areas. Do deal analysis on the above. Keep asking for input here. Or look for the nastiest property around. Doesn’t have to be a building. That’s always your best money maker.

Brian Cauldwell · Answer

Hi @Patric Doyle coming from a private institutional perspective, you will notice that lending for these multifamily properties (5+ units) changes, compared to buying rental properties that are 1-4 units. So, if you are looking to step into the 5+ unit space, then be prepared to learn a new set of lending guidelines. Some of the changes for those are less leverage (more cash down), higher interest rates, more strict DSCR requirements, and the use of in-place rents instead of market rents. This may be different with some lenders, but most follow those guidelines. I have had a lot of long conversations with my clients about they can expect when stepping into the commercial real estate space. As far as steps to getting into multifamily properties and being proactive in feeling comfortable in stepping into that space, I would start with 1-4 unit rentals. Running those properties, dealing with vacancies, etc. A 4-unit property would be the closest thing you could buy/operate that would show you what a 5+ unit property would feel like, while still getting essentially the same leverage and rates for a SFH.

Danny Simard · Answer

This is a fantastic list. Thanks for writing it up, @Kristi Kandel!

Ronald Rohde · Answer

YouTube is a great place to learn, pick an asset class and find everyone who posts about it

Patric Doyle · Answer

Thank you Kristi!

Danny Simard · Answer

That's correct. I don't think any of the US states have separate licenses for residential and non-resi, but I could be wrong. California has one license for all real property transactions.

Patric Doyle · Answer

Thanks Danny, that really helps. So, is the license for CRE the same as a general RE license?

Danny Simard · Answer

There are a few avenues to get into CRE. Unless you're going to business school, it's hard to get into private equity shops unless you already have the kind of connections I think you're looking for. The best and easiest way to start is to get licensed and join a team with a CRE brokerage. You can look to the big players (CBRE, JLL, Cushman & Wakefield, Colliers, Newmark, etc) to start. There is where you will work full time for a while just to build connections. There's more to it than that, but the core is building your network. My path works, too: I was able to get hired into commercial property management (W-2 job). Usually people start off as Property Administrator/Property Coordinator and can work their way up to Assistant Property Manager, Property Manager, etc.

Patric Doyle · Answer

Thank You Brian.