I've got the nerve, but how do I make this deal happen?

Question

I am ready to be rediculed at least a little because this is going to sound absurd, but I am okay with that, Here we go....

I want to get into commercial real estate. I find it by far the most appealing and exiting. My problem is simple, there is no "house hacking", or brrrr, or tricks to jumping into that field (that I am aware of). So how does someone jump into this field without something as simple as having 15% down on an industrial building, strip mall, or any commercial estate in general? I don't even think private money lenders would partner with me to get a deal.

Also, I realize that there are brokers/agents by the bunch for residential real estate, but how can I get acquainted with brokers who specialize in commercial ? They don't exist in Zillow!

Lastly, any good books/learning sites to expand my knowledge on commercial RE?

Cason Acor · Answer

Network, network, network.

Breaking into commercial real estate is all about who you know. Brokers, lenders, investors-the more people you know, the more deals and opportunities you will have.

With regard to "tricks" to get started, you'll most likely want to look at smaller, more rural deals to get your feet wet. I highly recommend finding a few partners with experience in the product type that you want to pursue, and start investing with them. They'll be able to show you the ropes while still taking on most of the equity responsibility.

Look for properties where the seller is willing to carry the note. You can usually negotiate much lower down payments for deals like that compared to traditional financing. You can also get an SBA loan on self-storage facilities. But I would only recommend starting in self-storage with an experienced partner, as those properties can be pretty management intensive.

Google "commercial real estate agents+your market" and "commercial mortgage lenders+your market" and start making a list of those people that you want to connect with. Most major markets will have commercial investor meetups as well. Investor meetups is where you'll be able to find partners.

What Every Real Estate Investor Needs to Know About Cash Flow by Frank Gallinelli is a good book to get started. Frank was a guest on one of the first ever podcast episodes.

Browse the websites of the major national brokerages, CBRE, Colliers, Newmark, Cushman, Marcus and Millichap; all of them will have free research reports that you can access and get up to speed pretty quickly.

Andrew Tripp · Answer

Agree with everything said above.  You'll have to show brokers/bankers that you are for real.  You'll need a partner (or multiple partners) that has some experience and/or a healthy balance sheet.  Depending on what you are trying to get into, maybe both.  Try to find a local credit union to take a look at your first deal, as they seem to be the most receptive to small commercial deals.  Might have to network your way in.

In terms of types of deals, be ready to do what other, more experienced investors have already passed on.  On-market stuff that's been picked over, but may still work with enough sweat equity and creativity for someone who is hungry and wants to get started.  There aren't as many tricks to getting off-market deals in the commercial space.  Brokers hold most of the cards here since owners are much more commercial-minded than homeowners.  Maybe you'll get lucky with seller financing or some sort of distressed situation, but those opportunities are really hit or miss in some markets.  I've heard of a few investors having success with direct mail campaigns, but you'll need to make sure you are bankable if you are going to do that.  No sense in sending out letters if you can't get financing.

Just as an example, the group I am part of started out about 7 years ago.  Most of us have some sort of real estate related experience from our day jobs.  It's a side hustle for all of us, so we've gone slow and only acquired 4 properties.  About to put a 5th under contract.  We're just now starting to get traction with brokers in terms of getting looks at good, off-market opportunities in our niche before they go up on LoopNet.  And I'm sure we are not the first call for any broker.  And we've built relationships with multiple local banks over the last couple years as we've grown.  So this really is a long game.  You can go faster than we did if you are full time, although financing is much harder to get if you are self-employed and/or have irregular income.

Hope this helps.

Katie Neason · Answer

When I broke into this market I did the following:

1. partnered with someone who had experience. Did a smaller deal (2 story multi tenant building under $1MM all in cost.

2. Found 2 tenants that wanted to rent the space while I had it under contract. Including me that was 3 tenants and 50% of the occupancy. This was not required by the bank but was required by me for my comfort level.

3. Did a value add property. The building was vacant and required a MAJOR renovation (it was exterior walls, a roof and dirt floors).

4. BRRRR'd the property with a cash out refi at the end of year 3.

Don Konipol · Answer

@Sergio Remedio

I think most posters here, while providing good and accurate advice, have jumped the gun.  IMO, your first move is to get educated on commercial/investment real estate.  Here you have various choices

1.  Get a job in the commercial RE field

a.  Commercial real estate agent

b.  Commercial mortgage broker

c.  Property management

d.  REIT

e.  Private real estate investment fund

f.   Real estate crowdfunding platform

g.  Real estate syndicator

h.  Private real estate investor

g.  Commercial builder

h.  Commercial contractor

i.   Title company

j.  Real estate law practice

k. Real estate accounting practice

2.  Obtain direct real estate education

a.  Undergraduate real estate degree

b.  Graduate real estate degree

c.  Commercial real estate courses offered by colleges

d.  Commercial real estate courses offered by real estate licensing schools

f.   Real estate courses offered by CCIM

g.  Real estate courses offered by NAR

h.  Real estate courses offered by REIAs

i.   Real estate courses offered by BOMA

j.   Commercial real estate textbooks

k.   Commercial real estate books non textbooks

l.   Online information

Good Luck!

Frank Hinck · Answer

@Sergio Remedio

Lookup the big commercial brokers CBRE CushWake Colliers NGKF Transwestern and your town/city.   Look on LoopNet the deals may not be there but you can find broker names and see what your commercial market looks like for industrial, malls, multifamily, etc.

Ben McMahon · Answer

@Sergio Remedio

Aside from knowing somebody, or getting to know someone there's a trick that I used effectively in getting into my first commercial deal.  Bring a cornerstone tenant.  Often, especially in small towns, its easy to know who the successful business owners are.  A lot of the time they are willing to talk, and even partner with someone who can put a deal together.

Most savvy investors are looking for reliable tenant contracts.  If you can bring that to them, its a no brainer.

So Find tenants willing to sign a lease.  Obviously the numbers have to work, and they need to be reliable.  If you can get your nut covered with solid tenant contracts than some lenders will lend on that.  Sometimes the value add is a lot easier in commercial space because you can repurpose.  Not possible in residential.

I used to take one tenant buildings and find 4 or 5 smaller tenants to occupy.  It takes a little work and creative juices, and some networking, but you can get those leases signed and either refi or flip it.

Talk to business owners, see what they are looking for, and you might be surprised how many of them have been overpaying for less than ideal space.

Paul Moore · Answer

Hi @Sergio Remedio. Thanks for your humility. I wrote a post on this exact topic. Even though I applied it to mobile home parks, it is applicable to anyone wanting to get into commercial real estate. Here you go: https://www.biggerpockets.com/...

Also, feel free to PM me and I can send along a free eCourse to help you figure out how to invest in commercial real estate.

There are also many podcasts out there on this topic. And if you narrow your focus on one arena within CRE, you can get a paid coach or mentor to help you get to the next level and possibly partner on deals.  Good luck!

Taylor L. · Answer

All great points here. I love that book too and recommend it to all new commercial real estate investors.

The first time you talk to a broker they're trying to feel you out to see if you're a tire kicker or if you're for real. The savviest brokers know that time is money and lots of people want to invest, but fewer are willing to take the action.

Point being, be sure you're mindful of their time and how you appear to brokers. Have you done the groundwork to be able to close a deal?

I've got the nerve, but how do I make this deal happen?

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