How do you flip Commercial Properties

Question

I've read often and in several different places that it's possible to flip commercial properties or wholesale them as you would a SFR.

I can't imagine that you (as the wholesaler) would spend a lot of money in legal fees for your lawyer to hammer out a 12 page p&s contract with the seller just so you can assign the deal to a buyer whose lawyer is going to want to hammer out the contract again.....

Or do you work it out as an option?

I'm not looking for a step-by-step playbook as I already know how to wholesale (and I'm sure no one out there has the time to walk me through the steps). I would just like to know what techniques are used to flip comm. property?

Thanks in advance.

Bill Gulley · Answer

Flipping commercial properties will have alot to do with your expertise in the market and the type of property to flip.

Commercial buyers are usually more sophistcated in the business arena. Take someone who wants to buy a retail store to expand his pharmacy business. The guy has been in business say 15 years, has done battle with commercial lenders, insurance companies, wholesaling jerks representing large businesses and letting contracts. He has purchase maybe three or four houses and maybe other commercial properties.

Now comesJoe investorwho expects to find this guy a building and flip to him at a higher price than Joe contracted it at.  What's the chance, in reality of that?

Point is, those in the commercial arena are usually somewhat successful business people and we seem to be under the impression that someone with no real business experience can read a few guru books and then out wit two other business people, the seller in getting a good deal and the buyer, paying more to cover a fee.

If someone has business experience and is aware of commercial markets, they have a chance.

Many who are wrenching their hands to get into big money are simply out of their leauge, a highschool ball player could get a hit off a major league pitcher (if he put one in there) but will he actually score in a major league game? Probably not, possible, but probably not.
So, for that highschool kid insisting on playing with major players will probably lead to alot of frustration, IMO.

Personally, I have been there, everyone has their first deal who has done commercial transactions. Before I closed a real deal, I tried a long time ago to flip as described above and it was fritless, a waste of time and cost me loss of income messing with it as well as expenses.
It was not until I had more general business knowledge and much more expertise in general real estate did deals start falling in place. It works when you can add value to the transaction that someone is willing to pay for.

In sales, they call it elephant hunting, doesn't matter what widget you're trying to sell, you just have this need to go after the big deal, just getting greedy.

Then trying to do commercial real estate, like a shopping center without any retail knowledge will likely get that new investor nowhere, worse, you may damage your reputation from screwing something up so badly that others avoid you for several years!

Gurus sell a false sence of knowldege and competency.

For full disclosure, Jeffery has PMed me in the past and we have been discussing the topic lightly and I asked him to post his question, he gave me this thread that had gone unanswered. My comments here are not directed toward Jeffery as much as other new investors that have similar thoughts.

As to the process, basically the same option arrangement can be worked out, but depending on what kind of property it is youwill have many things to address. Say it's a C-store, to sell it, you'll need to be able to explain things like traffic count, environmental requirements, burried gas tanks and liners, as an existing business you'll need to interpret financial statements, understand inventory turn over, beer licenses and distributorship agreements for gas. The list foes on.....

Now, to say commercial on BP, we usually assume you want an apartment building, pretty simple compared toother commercial real estate in the big picture. BP addresses just about all the issuesconcerning these properties.

Taking an option on a four-plex will be about like a SFD, but you may have more issues with local compliance, building codes, fire extinguishers, etc; that you don't have with a 3/2/2. It more due diligence and inspection, not so much different with the contract.

Hope this rant (lol) puts a light on the issue. Others may have a nickles worth.....Good luck

Jeffery Bigsby · Answer

Anybody out there....