Commercial Real Estate

So why do we like to invest in commercial real estate verses residential real estate?

Originally we were involved in a lot of residential real estate deals when we first got started, and as some of you may know, some of the big hooks all of the real estate “Guru’s” used to talk about like- never use any of your own money, no legal responsibilities, you can always walk away from the deal at any time- well that is what the “Guru’s” I studied under and paid a lot of money for their courses and seminars taught me way back then. Well, yes, at one time that all was true, but only in very, very specific financial situations, and obviously many laws have changed since then on a nationwide and state basis, and of course this historic “Guru” thinking goes back to our early investing experiences back in the early 2000’s. Well obviously the investing environment, laws, and investing techniques in general have certainly changed a lot since then, and as unfortunately I am also sure you are quite aware of our current financial state of our country which is, well, pretty sad.

So why do we like commercial real estate investing? First of all, it is all business. If the deal works for both parties it happens. If not, it does not. There are little to no emotions involved in the properties, which is really quite different than if you are trying to acquire “Dave and June’s home” because they are in default or foreclosure. (Plus folks in these situations tend to get sometimes very hostile, or are even just are in extreme denial about the whole situation.) So even if you do somehow acquire a distressed house, unless you can quickly sell or assign it, you then either make it your new home or you become the new landlord and then get the sometimes very difficult but always awakening experience of dealing with tenants- and all of their issues and demands. Even though you may try to budget for future repairs as a owner/landlord, can you even begin to plan for Mrs. Tenant to pour cooking grease and who knows what else down the garbage disposal until the line finally clogs? Or how about Mr. Tenant and his strong belief that to save money, all car engine oil changes should only be performed in his driveway, resulting in a very nasty discoloration of the driveway? Of course which the community HOA quickly sends you a letter about asking for you to get it cleaned up- at your expense, of course!

Oh and what about buying an apartment complex, how do you handle all those tenants? Unless it is a small complex, maybe up to 12-15 units, some owners will live onsite and also wear their property manager “hat” as well as being the owner. Larger complexes typically all use professional property managers, or a professional property management company, that often has their own maintenance department.

On the contrary, commercial real estate deals are just business, as previously mentioned. Commercial Real Estate (CRE) brokers are also generally a lot like the investors involved. They realize that is is a professional transaction and that there are little to no emotions involved. (The longer we do this, the less emotionally involved we are, anyway!) In commercial real estate, in analyzing the deal, it just comes down to the numbers- do they work? And then do you see the property somehow growing in value over time. There are a huge number of ways to increase the value of a CRE property- but please look for a future blog to cover this in the future.

 

We hope that you find that our website is helpful and informative for you as either a prospective or experienced investor. One last thought- we learned early on (but honestly we sometimes learned the hard way!) that it is so very important to always discuss any real estate transactions with your financial/legal team before you ever commit to anything. If you do not have such a team, it should be your very first priority to create one before you jump into the realm of active real estate investing.