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Video - Transactional Funding for Commercial Real Estate
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Video - How to Get Started Investing in Commercial Real Estate Investing
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Video - How to Attract Real Estate Investors to Your Deals?
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These investors understand that you make money when you buy real estate and cash your check when you sell it. To make money investing in real estate, you must buy well.
It’s easier said than done.
Here are 3 tips on how to do it dig out, open up, and get those owners working with you to make great deals happen:
1. Get one on one with the owner. It’s scientifically proven that if you don’t have other buyers competing for the property, you stand to profit from a lower purchase price. The owner will perceive you as the “right buyer” for the property and will not hold out for other “options” that may or may not be attainable.
In my commercial real estate brokerage company, many investors understand this concept. They call my brokers and ask that my people introduce them to “off market” deals where there isn’t “any competition” because they understand that being the only option at the table gives them a distinct advantage over other buyers and the owner.
2. Establish a personal connection. Studies at the top business schools have proven that when two parties know something about each other before entering the negotiation, they’re likely to reach an agreement in their negotiation than groups that don’t. Establish a personal connection with the owner of the property you’re buying. Share information about yourself, your background, and what you’re trying to accomplish by discussing a purchase of the property.
You’ll establish credibility with the owner as well as a basic human connection that will make you more persuasive in your negotiations. And because the owner knows more about you, he’ll make a greater effort to put a deal together.
3. Don’t let the owner get hung up on pricing. Did you know that when an owner makes a public proclamation of his desired price, he’s more likely to “hold out” because he doesn’t want to be embarrassed by selling for less?
When you’re negotiating with the owner, save the pricing discussion for later in the meeting. You must first understand why he’s selling and then work to the pricing talk. If you start with pricing, the owner will get stuck on his number and become defensive as you challenge his number.
Use these 3 tips in your next meeting and please email me of your successes.
Jeremy Cyrier, CCIM trains people who invest their own money in commercial real estate and believes that action without meaning is worthless. For a free copy of the Cap Rates Profit Report, visit: http://commercialrealestateinvestingeducation.com/free-cap-rates-profit-report.
3 Tips For Dealing With Tough Sellers
Commercial real estate owners who dig-in, say no, and don’t work the deal are tough to buy from, because they seem uncompromising. Many investors succeed at buying from them and make money in the process.These investors understand that you make money when you buy real estate and cash your check when you sell it. To make money investing in real estate, you must buy well.
It’s easier said than done.
Here are 3 tips on how to do it dig out, open up, and get those owners working with you to make great deals happen:
1. Get one on one with the owner. It’s scientifically proven that if you don’t have other buyers competing for the property, you stand to profit from a lower purchase price. The owner will perceive you as the “right buyer” for the property and will not hold out for other “options” that may or may not be attainable.
In my commercial real estate brokerage company, many investors understand this concept. They call my brokers and ask that my people introduce them to “off market” deals where there isn’t “any competition” because they understand that being the only option at the table gives them a distinct advantage over other buyers and the owner.
2. Establish a personal connection. Studies at the top business schools have proven that when two parties know something about each other before entering the negotiation, they’re likely to reach an agreement in their negotiation than groups that don’t. Establish a personal connection with the owner of the property you’re buying. Share information about yourself, your background, and what you’re trying to accomplish by discussing a purchase of the property.
You’ll establish credibility with the owner as well as a basic human connection that will make you more persuasive in your negotiations. And because the owner knows more about you, he’ll make a greater effort to put a deal together.
3. Don’t let the owner get hung up on pricing. Did you know that when an owner makes a public proclamation of his desired price, he’s more likely to “hold out” because he doesn’t want to be embarrassed by selling for less?
When you’re negotiating with the owner, save the pricing discussion for later in the meeting. You must first understand why he’s selling and then work to the pricing talk. If you start with pricing, the owner will get stuck on his number and become defensive as you challenge his number.
Use these 3 tips in your next meeting and please email me of your successes.
Jeremy Cyrier, CCIM trains people who invest their own money in commercial real estate and believes that action without meaning is worthless. For a free copy of the Cap Rates Profit Report, visit: http://commercialrealestateinvestingeducation.com/free-cap-rates-profit-report.
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Here's how not to speak to a commercial real estate broker
Bob calls on ABC Brokerage. Bob says, “Hi, I’m looking for a deal that makes sense. Preferably, I’d like a distressed asset, you know, one where the seller has to sell! If you see anything, could you send it to me? Oh, and by the way, I’m also searching for properties in emerging markets, do you have any of those?”
What the Broker Hears:
“Hi, I don’t know what I’m looking for but want to make some money. But who doesn’t, right? I know you probably represent a lot of owners, so if you could violate your fiduciary obligation to represent your client and tell me which one might be going through some personal and financial problems, I’d appreciate it. Oh, and by the way, I’m looking for something in an emerging market because I’ve heard that’s a good place to look. Who talks about my local market as emerging, anyway?”
How to Sound Like a Pro and Get the Broker’s Attention:
Compare the above statements to the following investor’s call to ABC Brokerage who uses brokers wisely. “Hi, I’m in the market for another investment property. Preferably, I’m looking for an office building between 8,000 to 15,000 SF located within 3 miles of the 93 and 95 interchange that is ADA accessible and 50-75% occupied. Maybe the owner has had some issues filling the building. I’d like to buy it to help out. Would you be interested in meeting to discuss sourcing such opportunities for me? I have a master buyer representation agreement I use and would be happy to pay you for your success. Oh and by the way, I’m looking for properties in markets where you see job growth, new infrastructure projects, and new housing units being built. It’s a longer term strategy, but I’ve identified some areas I’d like to investigate. Would you be willing to sit down with me to discuss them?”
In this new conversation, the broker hears a professional investor who has thought through the specifics of what he’s looking for. This investor provides the broker with a concrete, specific framework and has translated his vague, open ended statements into simple, measurable details that make it easier for the broker to understand his search requirement as well as get the sense that this guy might know what he’s doing. Plus, the investor has offered to meet with the broker to schedule a time to talk about compensation for actually doing work on his behalf. It sounds like this broker better take the meeting.
Don't march off and start calling brokers unless you know what you want and how you want to use them. Communicate your message in clear, simple, thoughtful words that guide the broker to conclude that you are indeed qualified, know what you want, and have a high likelihood of buying a property.
Jeremy Cyrier, CCIM trains people who invest their own money in commercial real estate and believes that action without meaning is worthless. For a free copy of the Cap Rates Profit Report, visit: http://commercialrealestateinvestingeducation.com/free-cap-rates-profit-report.
How to Sound Like a Pro to Commercial Real Estate Brokers
Commercial real estate brokers can be your greatest resource to finding deals, if you use them wisely. Many investors make the mistake of speaking to brokers in "boot camp" speak and treating them like a community resource, there for everyone to use and for someone else to pay.Here's how not to speak to a commercial real estate broker
Bob calls on ABC Brokerage. Bob says, “Hi, I’m looking for a deal that makes sense. Preferably, I’d like a distressed asset, you know, one where the seller has to sell! If you see anything, could you send it to me? Oh, and by the way, I’m also searching for properties in emerging markets, do you have any of those?”
What the Broker Hears:
“Hi, I don’t know what I’m looking for but want to make some money. But who doesn’t, right? I know you probably represent a lot of owners, so if you could violate your fiduciary obligation to represent your client and tell me which one might be going through some personal and financial problems, I’d appreciate it. Oh, and by the way, I’m looking for something in an emerging market because I’ve heard that’s a good place to look. Who talks about my local market as emerging, anyway?”
How to Sound Like a Pro and Get the Broker’s Attention:
Compare the above statements to the following investor’s call to ABC Brokerage who uses brokers wisely. “Hi, I’m in the market for another investment property. Preferably, I’m looking for an office building between 8,000 to 15,000 SF located within 3 miles of the 93 and 95 interchange that is ADA accessible and 50-75% occupied. Maybe the owner has had some issues filling the building. I’d like to buy it to help out. Would you be interested in meeting to discuss sourcing such opportunities for me? I have a master buyer representation agreement I use and would be happy to pay you for your success. Oh and by the way, I’m looking for properties in markets where you see job growth, new infrastructure projects, and new housing units being built. It’s a longer term strategy, but I’ve identified some areas I’d like to investigate. Would you be willing to sit down with me to discuss them?”
In this new conversation, the broker hears a professional investor who has thought through the specifics of what he’s looking for. This investor provides the broker with a concrete, specific framework and has translated his vague, open ended statements into simple, measurable details that make it easier for the broker to understand his search requirement as well as get the sense that this guy might know what he’s doing. Plus, the investor has offered to meet with the broker to schedule a time to talk about compensation for actually doing work on his behalf. It sounds like this broker better take the meeting.
Don't march off and start calling brokers unless you know what you want and how you want to use them. Communicate your message in clear, simple, thoughtful words that guide the broker to conclude that you are indeed qualified, know what you want, and have a high likelihood of buying a property.
Jeremy Cyrier, CCIM trains people who invest their own money in commercial real estate and believes that action without meaning is worthless. For a free copy of the Cap Rates Profit Report, visit: http://commercialrealestateinvestingeducation.com/free-cap-rates-profit-report.
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Just declaring to your friends and family that you are a real estate investor is not enough. You must get the word out to let everyone know that you are buying real estate and that anyone interested in selling his property should call you. Here's the catch. You aren't going to tell the entire world. You're only going to tell the people that want to meet you.
These are your targets.
Rule #1: All good marketing starts with a clear target. This means that you define who you are trying to reach. For example, I want to buy properties from owners that are debt free because they like to offer me seller financing. Therefore, I target owners in my market area who own their properties free and clear, particularly in communities that I want to invest in.
Now that you've defined your target, it's time to move to crafting your message for reaching out to them.
Rule #2: All good marketing starts with a good messaging. Have you ever wondered why retailers ask you to sign up for their discount cards? They track all of your purchases and gather mountains of market intelligence about your buying habits so they can make smarter decisions when buying inventory and pricing programs. You must also understand your audience. What matters to your sellers? How will you provide a meaningful experience for them when they sell their building to you?
Once you've identified your target and crafted your messaging, now you'll have to implement a system for communicating your message to your audience. You may hear that signs, letters, or email are the best systems to use to broadcast your message. Guess what? You need to do them all.
Rule #3: All good marketing thrives on multiple systems. You must simultaneously work multiple systems to bring your message to your target audience because no one system will consistently fill your pipeline--it will vary from month to month. That's why you need a calling system, mailing system, internet marketing system, print advertising system, etc. You must be firing on all cylinders at all times to keep your lead pipeline full.
Here's where most people fail: they don't measure their results.
Rule #4: What gets measured gets managed. What gets managed gets funded. This an old saying my father (a veteran HP executive) tells me and it rings true today. If you don't know where your leads are coming from and why, you'll miss the opportunity to fine tune your systems to make them perform at maximum capacity for you. Then you'll start to wonder whether the investment is worthwhile or not. And when you do measure and manage, you'll have a steady flow of leads that will turn into opportunities for you to do deals, over and over again.
In a nutshell, if you aren't marketing, you're missing the lifeblood of your business. You must start marketing today. Make sure you follow the 4 rules listed above because without them, you may as well be throwing money out the window while driving down the highway hoping for something to happen. It's not going to and all you'll have at the end of the day are no leads, no deals, and an empty bank account.
Jeremy Cyrier, CCIM trains people who invest their own money in commercial real estate at http://www.CommercialRealEstateInvestingEducation.com. For a free report on residential vs. commercial real estate investing, visit: http://commercialrealestateinvestingeducation.com/residential-vs-commercial-property-investment-report.
The Easiest Way to Get Real Estate Leads
All good deals start with good marketing. And if you're not marketing for good deals, you're not going to be doing any. That means you won't be making any money and your competition will be soaking up the opportunities in your market area.Just declaring to your friends and family that you are a real estate investor is not enough. You must get the word out to let everyone know that you are buying real estate and that anyone interested in selling his property should call you. Here's the catch. You aren't going to tell the entire world. You're only going to tell the people that want to meet you.
These are your targets.
Rule #1: All good marketing starts with a clear target. This means that you define who you are trying to reach. For example, I want to buy properties from owners that are debt free because they like to offer me seller financing. Therefore, I target owners in my market area who own their properties free and clear, particularly in communities that I want to invest in.
Now that you've defined your target, it's time to move to crafting your message for reaching out to them.
Rule #2: All good marketing starts with a good messaging. Have you ever wondered why retailers ask you to sign up for their discount cards? They track all of your purchases and gather mountains of market intelligence about your buying habits so they can make smarter decisions when buying inventory and pricing programs. You must also understand your audience. What matters to your sellers? How will you provide a meaningful experience for them when they sell their building to you?
Once you've identified your target and crafted your messaging, now you'll have to implement a system for communicating your message to your audience. You may hear that signs, letters, or email are the best systems to use to broadcast your message. Guess what? You need to do them all.
Rule #3: All good marketing thrives on multiple systems. You must simultaneously work multiple systems to bring your message to your target audience because no one system will consistently fill your pipeline--it will vary from month to month. That's why you need a calling system, mailing system, internet marketing system, print advertising system, etc. You must be firing on all cylinders at all times to keep your lead pipeline full.
Here's where most people fail: they don't measure their results.
Rule #4: What gets measured gets managed. What gets managed gets funded. This an old saying my father (a veteran HP executive) tells me and it rings true today. If you don't know where your leads are coming from and why, you'll miss the opportunity to fine tune your systems to make them perform at maximum capacity for you. Then you'll start to wonder whether the investment is worthwhile or not. And when you do measure and manage, you'll have a steady flow of leads that will turn into opportunities for you to do deals, over and over again.
In a nutshell, if you aren't marketing, you're missing the lifeblood of your business. You must start marketing today. Make sure you follow the 4 rules listed above because without them, you may as well be throwing money out the window while driving down the highway hoping for something to happen. It's not going to and all you'll have at the end of the day are no leads, no deals, and an empty bank account.
Jeremy Cyrier, CCIM trains people who invest their own money in commercial real estate at http://www.CommercialRealEstateInvestingEducation.com. For a free report on residential vs. commercial real estate investing, visit: http://commercialrealestateinvestingeducation.com/residential-vs-commercial-property-investment-report.
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Imagine tying up a property, losing your deposit, wasting your due diligence money, and then potentially having to close on a deal that you never wanted to buy in the first place. You don't want to be in this situation. I've watched many investors lose money on flips that they hoped would work out, only to be disappointed and embarrassed when they failed.
If you're going to invest in flipping a piece of commercial real estate, you must adhere to 3 critical tips to ensure your success, or else you may end of wasting time, money and energy on a dead end.
Here are 3 tips:
1. Make sure the next guy will pay more than you. Buyers will value commercial real estate differently depending on their use. For example, a bank may value a free standing building with a drive through differently than a used car dealer, which means that when you're formulating your exit on your flip, establish a clear exit and know who your buyer will be. Not knowing your buyer and what they'll pay could cost you.
2. Improve the net operating income fast by tenanting the property. Many investors I train search for properties that are 50% occupied because they like to buy them with a stable income. When they value the building, the income determines its worth and they know that if they locate a tenant for the other 50% of the building, they could double the net operating income as well as the building's value. The trick to make this flip a success is first finding the building and second finding the tenant. Make sure you have a plan for both before you move forward.
3. Make your buyer sign a non-circumvent and confidentiality agreement before showing them the deal. Many investors play a win-lose game of negotiations and will try to circumvent you to cut you out of your deal unless you protect yourself. Before you show an opportunity to anyone, make sure they have signed the necessary paperwork or else you might get burned.
In all, before you draw up your purchase and sale agreement, make sure that you have your buyer profiled with a plan for reaching out and working your plan. And if all goes well, you'll make big profits on your flip and enjoy your new found success.
About the Author:
Jeremy Cyrier, CCIM trains people who invest their own money in commercial real estate at http://www.CommercialRealEstateInvestingEducation.com. For a free report on residential vs. commercial real estate investing, visit: http://commercialrealestateinvestingeducation.com/residential-vs-commercial-property-investment-report.
3 Tips for Investing in Commercial Property to Flip
When you're investing in flipping commercial real estate, it is possible to make $500,000 in 4 hours, but you have to know what you're doing and beware not to succumb to many pitfalls that commercial real estate investors face with flips.Imagine tying up a property, losing your deposit, wasting your due diligence money, and then potentially having to close on a deal that you never wanted to buy in the first place. You don't want to be in this situation. I've watched many investors lose money on flips that they hoped would work out, only to be disappointed and embarrassed when they failed.
If you're going to invest in flipping a piece of commercial real estate, you must adhere to 3 critical tips to ensure your success, or else you may end of wasting time, money and energy on a dead end.
Here are 3 tips:
1. Make sure the next guy will pay more than you. Buyers will value commercial real estate differently depending on their use. For example, a bank may value a free standing building with a drive through differently than a used car dealer, which means that when you're formulating your exit on your flip, establish a clear exit and know who your buyer will be. Not knowing your buyer and what they'll pay could cost you.
2. Improve the net operating income fast by tenanting the property. Many investors I train search for properties that are 50% occupied because they like to buy them with a stable income. When they value the building, the income determines its worth and they know that if they locate a tenant for the other 50% of the building, they could double the net operating income as well as the building's value. The trick to make this flip a success is first finding the building and second finding the tenant. Make sure you have a plan for both before you move forward.
3. Make your buyer sign a non-circumvent and confidentiality agreement before showing them the deal. Many investors play a win-lose game of negotiations and will try to circumvent you to cut you out of your deal unless you protect yourself. Before you show an opportunity to anyone, make sure they have signed the necessary paperwork or else you might get burned.
In all, before you draw up your purchase and sale agreement, make sure that you have your buyer profiled with a plan for reaching out and working your plan. And if all goes well, you'll make big profits on your flip and enjoy your new found success.
About the Author:
Jeremy Cyrier, CCIM trains people who invest their own money in commercial real estate at http://www.CommercialRealEstateInvestingEducation.com. For a free report on residential vs. commercial real estate investing, visit: http://commercialrealestateinvestingeducation.com/residential-vs-commercial-property-investment-report.
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Let's start with defining the capitalization rate. (Free Cap Rates Profit Report, click here.)
The capitalization rate is an investment measure that's defined as the ratio relationship (reflected as a percentage) between the first year's net operating income and the purchase price of your investment.
In English, this means that if you pay $1,000,000 cash for a property and you receive $100,000 in cash flow over the next 12 months, your capitalization rate would be 10%. Or, if you were seeking to purchase property at a 10% cap rate and were considering a $1,000,000 investment, you would you receive $100,000 back in the first 12 months.
Here it's illustrated as a mathematical formula.
The Capitalization Rate Formula
Income ÷ Value = Rate | $100,000 ÷ $1,000,000 = 10%
Rate x Value = Income | 10% x $1,000,000 = $100,000
Income ÷ Rate = Value | $100,000 ÷ 10% = $1,000,000
What if that same property that's worth $1,000,000 throwing off $100,000 starts producing more income per year?
Let's say you purchased the property and made some improvements to the building, hired better management, and eliminated wasteful expenses. You've improved the bottom line and at the end of the year, you've added $25,000 to the annual income, bringing your total net operating income to $125,000 per year. Nicely done.
It doesn't sound like much, but here's where it gets exciting. Apply your profits formula to this property and see what's it's worth.
Start with calculating your new value based on the improved bottom line net operating income you've created and then subtract the value that you paid for the investment. The difference between those two numbers reveals the profit on the investment.
Here's an illustration of how it works.
The Cap Rate Profits Formula (Click here for a Free Cap Rates Report)
Exit Value: $125,000 (Income) ÷ 10% (Rate) = $1,250,000 (Value)
- Purchase Value: $100,000 (Income) ÷ 10% (Rate ) = $1,000,000 (Value) _____________________________________________________________
Your Profit = $250,000
Small changes to the operations of a property mean big profits when you sell the investment. That's why investors love commercial real estate. They seek out good cap rates. Then they improve the net operating income by driving more income to the bottom line. When they're done and ready to move to the next investment, they sell the property for big profits fast.
Jeremy Cyrier, CCIM trains people who invest their own money in commercial real estate and believes that action without meaning is worthless. Jeremy Cyrier, CCIM is the President of CommercialRealEstateInvestingEducation.com. For a free copy of the Cap Rates Profit Report, visit: http://commercialrealestateinvestingeducation.com/free-cap-rates-profit-report/.
Why Good Cap Rates Mean Great Profits in Real Estate
Many of you may be asking yourselves, "How can I use cap rates to predict real estate investing profits?"Let's start with defining the capitalization rate. (Free Cap Rates Profit Report, click here.)
The capitalization rate is an investment measure that's defined as the ratio relationship (reflected as a percentage) between the first year's net operating income and the purchase price of your investment.
In English, this means that if you pay $1,000,000 cash for a property and you receive $100,000 in cash flow over the next 12 months, your capitalization rate would be 10%. Or, if you were seeking to purchase property at a 10% cap rate and were considering a $1,000,000 investment, you would you receive $100,000 back in the first 12 months.
Here it's illustrated as a mathematical formula.
The Capitalization Rate Formula
Income ÷ Value = Rate | $100,000 ÷ $1,000,000 = 10%
Rate x Value = Income | 10% x $1,000,000 = $100,000
Income ÷ Rate = Value | $100,000 ÷ 10% = $1,000,000
What if that same property that's worth $1,000,000 throwing off $100,000 starts producing more income per year?
Let's say you purchased the property and made some improvements to the building, hired better management, and eliminated wasteful expenses. You've improved the bottom line and at the end of the year, you've added $25,000 to the annual income, bringing your total net operating income to $125,000 per year. Nicely done.
It doesn't sound like much, but here's where it gets exciting. Apply your profits formula to this property and see what's it's worth.
Start with calculating your new value based on the improved bottom line net operating income you've created and then subtract the value that you paid for the investment. The difference between those two numbers reveals the profit on the investment.
Here's an illustration of how it works.
The Cap Rate Profits Formula (Click here for a Free Cap Rates Report)
Exit Value: $125,000 (Income) ÷ 10% (Rate) = $1,250,000 (Value)
- Purchase Value: $100,000 (Income) ÷ 10% (Rate ) = $1,000,000 (Value) _____________________________________________________________
Your Profit = $250,000
Small changes to the operations of a property mean big profits when you sell the investment. That's why investors love commercial real estate. They seek out good cap rates. Then they improve the net operating income by driving more income to the bottom line. When they're done and ready to move to the next investment, they sell the property for big profits fast.
Jeremy Cyrier, CCIM trains people who invest their own money in commercial real estate and believes that action without meaning is worthless. Jeremy Cyrier, CCIM is the President of CommercialRealEstateInvestingEducation.com. For a free copy of the Cap Rates Profit Report, visit: http://commercialrealestateinvestingeducation.com/free-cap-rates-profit-report/.
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Most of you will spend time building your team, taking classes, reading books, raising private money, talking to banks, or telling friends about how great life will be once you buy your first investment property. You're getting ready to invest. It's exciting.
Here's the bad news, without deal flow, you won't invest and your friends will ask you what happened to your big plans. Don't feel bad, most commercial real estate investors complain that they need more deal flow and have to answer to their friends, too. They tend to get together and talk about how bad the market is, why brokers are useless, and that the right deal that makes sense will come along one of these days.
Don't make this mistake, you have to start with finding the deal, which means taking action today!
Imagine you're flying over your target market with a parachute on your back. You jump out of the plane, float to the ground, land, and are told that you have 30 days to buy 3 commercial real estate properties.
What's the first thing you should do? Start with finding the deal.
Here's one trick for accessing instant deal flow. Contact people who want to sell their properties because they have some problem to solve - divorce, retirement, death of a partner, medical problems, family issues, they're burned out on management, or they have to sell to buy a bigger property they've identified.
Many of these owners have already tried to sell, but have failed. Their property was poorly marketed or over priced. They have become expired sellers or listings.
Obtain a list of expired listings from the local multiple listing service. Source the owner's contact information and call them to see whether they're still interested in selling their property. Send them letters that tell them you are an investor who must purchase 3 properties in the next 30 days. You need their help!
Call area real estate brokers and ask them which properties will soon be expiring because you're purchasing properties and want to make sure they get paid for their hard work.
Once you have a list of opportunities, meet with the owners, negotiate purchase and sale agreements, and tie up the 3 buildings that fit your investment criteria. Now that you have 3 deals that everyone else is looking for, start networking, advertising, building your team, talking to lenders, calling brokers to let everyone know that you have 3 money-making commercial real estate investment opportunities available.
You're looking for partners, private financing, or other investors that want to pay you a fee for you purchase and sale agreement. If your deals are "real", word will spread quickly.
And if your deals "make sense", you'll have investors clamoring to get into or pay you for your deals.
Remember, you control 3 money making deals that they want.
Now it's up to you to put the deals together, learn, and profit from your actions.
Jeremy Cyrier, CCIM trains people who invest their own money in commercial real estate. For a free report on residential vs. commercial real estate investing, click here.
The Best Way to Get Started Investing in Commercial Real Estate
Consistent deal flow is the lifeblood of the commercial real estate investor.Most of you will spend time building your team, taking classes, reading books, raising private money, talking to banks, or telling friends about how great life will be once you buy your first investment property. You're getting ready to invest. It's exciting.
Here's the bad news, without deal flow, you won't invest and your friends will ask you what happened to your big plans. Don't feel bad, most commercial real estate investors complain that they need more deal flow and have to answer to their friends, too. They tend to get together and talk about how bad the market is, why brokers are useless, and that the right deal that makes sense will come along one of these days.
Don't make this mistake, you have to start with finding the deal, which means taking action today!
Imagine you're flying over your target market with a parachute on your back. You jump out of the plane, float to the ground, land, and are told that you have 30 days to buy 3 commercial real estate properties.
What's the first thing you should do? Start with finding the deal.
Here's one trick for accessing instant deal flow. Contact people who want to sell their properties because they have some problem to solve - divorce, retirement, death of a partner, medical problems, family issues, they're burned out on management, or they have to sell to buy a bigger property they've identified.
Many of these owners have already tried to sell, but have failed. Their property was poorly marketed or over priced. They have become expired sellers or listings.
Obtain a list of expired listings from the local multiple listing service. Source the owner's contact information and call them to see whether they're still interested in selling their property. Send them letters that tell them you are an investor who must purchase 3 properties in the next 30 days. You need their help!
Call area real estate brokers and ask them which properties will soon be expiring because you're purchasing properties and want to make sure they get paid for their hard work.
Once you have a list of opportunities, meet with the owners, negotiate purchase and sale agreements, and tie up the 3 buildings that fit your investment criteria. Now that you have 3 deals that everyone else is looking for, start networking, advertising, building your team, talking to lenders, calling brokers to let everyone know that you have 3 money-making commercial real estate investment opportunities available.
You're looking for partners, private financing, or other investors that want to pay you a fee for you purchase and sale agreement. If your deals are "real", word will spread quickly.
And if your deals "make sense", you'll have investors clamoring to get into or pay you for your deals.
Remember, you control 3 money making deals that they want.
Now it's up to you to put the deals together, learn, and profit from your actions.
Jeremy Cyrier, CCIM trains people who invest their own money in commercial real estate. For a free report on residential vs. commercial real estate investing, click here.
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Imagine calling a law firm and explaining your case to an attorney, asking him to appear in court on a given day, without signing a retainer agreement and never handing over a check to engage his services. What are the odds that he’s going to show up?
Not good.
That’s why it doesn’t surprise me when people complain about useless real estate brokers. They’re frustrated when they’ve asked someone to do something for them, only they've made no commitment and no agreement to pay them for their investment in your interests.
Brokers work for people that have signed an agreement with them to provide them with services. Most of the time, this means that they are working with owners of investment properties to either keep them at 100% occupancy, help them sell, and help them buy. These owners have hired them to perform a set of duties and services for an agreed upon fee.
How to Convince Brokers Not to Help You
You'll find great difficulty in recruiting brokers to your cause if you speak to them in boot camp and vague investment jargon. Take Bob for example. Bob calls on ABC Brokerage. Bob says, “Hi, I’m looking for a deal that makes sense. Preferably, I’d like a distressed asset, you know, one where the seller has to sell! If you see anything, could you send it to me? Oh, and by the way, I’m also searching for properties in emerging markets, do you have any of those?”
What the Broker Hears
“Hi, I don’t know what I’m looking for but want to make some money. But who doesn’t, right? I know you probably represent a lot of owners, so if you could violate your fiduciary obligation to represent your client and tell me which one might be going through some personal and financial problems, I’d appreciate it. Oh, and by the way, I’m looking for something in an emerging market because I’ve heard that’s a good place to look. Who talks about my local market as emerging, anyway? Would you be willing to waste your time on me?"
When you’re looking for a broker to work with you in finding a deal, you need to know who you’re looking for. You have to learn to speak their secret language to unlock their vast network of resources, market knowledge, relationships, and insights into where the deals are going to be in your market.
As the owner of a commercial real estate brokerage company, I hear my brokers having these conversations every day. That's why I wrote a module in my new course to help many of you build a story that sells because you should have brokers asking to meet with you, introducing you to deals you didn't know exist, and helping you fill your buildings with tenants they have in the market.
Jeremy Cyrier, CCIM believes that action without meaning is worthless. That's why he trains people who invest their own money in commercial real estate at CreInvestEd.com. For a free report on residential vs. commercial real estate investing, visit: http://commercialrealestateinvestingeducation.com/residential-vs-commercial-property-investment-report.
Secrets For Dealing With Real Estate Brokers
Many of you may make the mistake of calling a broker, explaining what you're looking for, and waiting for the opportunities to start rolling in. You want to buy investment property and the broker wants to make a commission, right? Yes. You're right. But you're also wrong.Imagine calling a law firm and explaining your case to an attorney, asking him to appear in court on a given day, without signing a retainer agreement and never handing over a check to engage his services. What are the odds that he’s going to show up?
Not good.
That’s why it doesn’t surprise me when people complain about useless real estate brokers. They’re frustrated when they’ve asked someone to do something for them, only they've made no commitment and no agreement to pay them for their investment in your interests.
Brokers work for people that have signed an agreement with them to provide them with services. Most of the time, this means that they are working with owners of investment properties to either keep them at 100% occupancy, help them sell, and help them buy. These owners have hired them to perform a set of duties and services for an agreed upon fee.
How to Convince Brokers Not to Help You
You'll find great difficulty in recruiting brokers to your cause if you speak to them in boot camp and vague investment jargon. Take Bob for example. Bob calls on ABC Brokerage. Bob says, “Hi, I’m looking for a deal that makes sense. Preferably, I’d like a distressed asset, you know, one where the seller has to sell! If you see anything, could you send it to me? Oh, and by the way, I’m also searching for properties in emerging markets, do you have any of those?”
What the Broker Hears
“Hi, I don’t know what I’m looking for but want to make some money. But who doesn’t, right? I know you probably represent a lot of owners, so if you could violate your fiduciary obligation to represent your client and tell me which one might be going through some personal and financial problems, I’d appreciate it. Oh, and by the way, I’m looking for something in an emerging market because I’ve heard that’s a good place to look. Who talks about my local market as emerging, anyway? Would you be willing to waste your time on me?"
When you’re looking for a broker to work with you in finding a deal, you need to know who you’re looking for. You have to learn to speak their secret language to unlock their vast network of resources, market knowledge, relationships, and insights into where the deals are going to be in your market.
As the owner of a commercial real estate brokerage company, I hear my brokers having these conversations every day. That's why I wrote a module in my new course to help many of you build a story that sells because you should have brokers asking to meet with you, introducing you to deals you didn't know exist, and helping you fill your buildings with tenants they have in the market.
Jeremy Cyrier, CCIM believes that action without meaning is worthless. That's why he trains people who invest their own money in commercial real estate at CreInvestEd.com. For a free report on residential vs. commercial real estate investing, visit: http://commercialrealestateinvestingeducation.com/residential-vs-commercial-property-investment-report.
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How to Convince a Seller to Lower His Price
As a real estate investor, you meet sellers who expect you to pay unreasonable prices and to assume risk with no profit.
Good deal for the seller; bad deal for you.
You and the seller are thinking, "if you were just rational and reasonable about making this deal happen, we'd be able to come to agreement." Here's the problem, you're both thinking in absolutes.
The discussion has two issues, the building and the price. You've reached a dead end.
Let's rewind and use the following steps.
Step 1: When he asks, how much will you pay for my property? The seller wants to sell because it will solve his problems. He believes that the conversation begins with his solution--price for the building.
Tell him, "I want to pay you a price you'll accept for the property. Before we go there, would you mind if I asked you a few questions?" Show respect of his position, that you're on the same page, and that you want to make a deal happen.
Step 2: While you are in the real estate business, you're in the people who own real estate business. You must explore the seller's reasons for selling. He has personal motivations, plans for the money, timing issues, family plans, etc. Uncover this information.
Step 3: There are 3 components to making a deal: price, terms, and conditions. If you've completed Steps 2, then you know that he's selling to satisfy his divorce judgment, his loan maturity, or he's tired of managing and wants his evenings back to spend with his children. Start talking about terms and conditions. Terms and conditions solve these problems.
Step 4: Skip the price ultimatum to avoid being a loser. We learned to negotiate by moving to the price ultimatum too quickly. Don't go there unless it's a last resort. When you have two people arguing to save face by winning, in many cases, both lose.
Step 5: People rarely argue with conclusions they come to on their own. They believe stories they tell themselves. As the price focused investor, you are trying to convince the seller that he's unrealistic, overpriced, and never going to get that price. Guess what, you've just convinced him that he should try for what he thinks he should get. He doesn't believe you.
Guide him to his own conclusion. Remind him that he wants to sell the property to free his evenings to spend time with his kids and that he wants to stop answering tenant calls for clogged toilets. Remind him that he told you he's tired and wants his quality of life back and that you can help him do that. Now, ask him, "what will it take to make this happen for you?" Use the investment property to solve the seller's problem by structuring price, terms, and conditions together.
When you're in the people who own real estate business, it's easier to solve these problems and reach mutually advantageous agreements. When you skip these steps and enter the building and price discussion, you miss profitable deals, lose negotiations, and piss off people who feel disrespected by your inability to make a deal happen.
And if it's too late and you're in the building and price discussion, stop now. Tell the seller you're embarrassed that you've made a mistake. Ask permission to ask some questions before moving forward. He'll respect your honesty and you'll be off to a good start!
Good luck and please share stories of your successes!
Good deal for the seller; bad deal for you.
You and the seller are thinking, "if you were just rational and reasonable about making this deal happen, we'd be able to come to agreement." Here's the problem, you're both thinking in absolutes.
The discussion has two issues, the building and the price. You've reached a dead end.
Let's rewind and use the following steps.
Step 1: When he asks, how much will you pay for my property? The seller wants to sell because it will solve his problems. He believes that the conversation begins with his solution--price for the building.
Tell him, "I want to pay you a price you'll accept for the property. Before we go there, would you mind if I asked you a few questions?" Show respect of his position, that you're on the same page, and that you want to make a deal happen.
Step 2: While you are in the real estate business, you're in the people who own real estate business. You must explore the seller's reasons for selling. He has personal motivations, plans for the money, timing issues, family plans, etc. Uncover this information.
Step 3: There are 3 components to making a deal: price, terms, and conditions. If you've completed Steps 2, then you know that he's selling to satisfy his divorce judgment, his loan maturity, or he's tired of managing and wants his evenings back to spend with his children. Start talking about terms and conditions. Terms and conditions solve these problems.
Step 4: Skip the price ultimatum to avoid being a loser. We learned to negotiate by moving to the price ultimatum too quickly. Don't go there unless it's a last resort. When you have two people arguing to save face by winning, in many cases, both lose.
Step 5: People rarely argue with conclusions they come to on their own. They believe stories they tell themselves. As the price focused investor, you are trying to convince the seller that he's unrealistic, overpriced, and never going to get that price. Guess what, you've just convinced him that he should try for what he thinks he should get. He doesn't believe you.
Guide him to his own conclusion. Remind him that he wants to sell the property to free his evenings to spend time with his kids and that he wants to stop answering tenant calls for clogged toilets. Remind him that he told you he's tired and wants his quality of life back and that you can help him do that. Now, ask him, "what will it take to make this happen for you?" Use the investment property to solve the seller's problem by structuring price, terms, and conditions together.
When you're in the people who own real estate business, it's easier to solve these problems and reach mutually advantageous agreements. When you skip these steps and enter the building and price discussion, you miss profitable deals, lose negotiations, and piss off people who feel disrespected by your inability to make a deal happen.
And if it's too late and you're in the building and price discussion, stop now. Tell the seller you're embarrassed that you've made a mistake. Ask permission to ask some questions before moving forward. He'll respect your honesty and you'll be off to a good start!
Good luck and please share stories of your successes!
Jeremy Cyrier, CCIM trains people who invest their own money in commercial real estate and believes that action without meaning is worthless. Jeremy Cyrier, CCIM is the President of CommercialRealEstateInvestingEducation.com. For more commercial real estate investing tips, visit: http://commercialrealestateinvestingeducation.com/residential-vs-commercial-property-investment-report.
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Let's start with defining the capitalization rate, or cap rate for short. The capitalization rate is an investment measure that's defined as the ratio relationship (reflected as a percentage) between the first year's net operating income and the purchase price of your investment.
In plain english, this means that if you pay $1,000,000 cash for a property and you receive $100,000 in cash flow over the next 12 months, your capitalization rate would be 10%.
Or, if you were seeking to purchase property at a 10% cap rate and were considering a $1,000,000 investment, you would you receive $100,000 back in the first 12 months.
Simple, but here's where it becomes complicated.
Cap rates are not the same for any investment property you want to buy or sell. They change across markets and property types. For example, a mobile home park in Alabama will have a different rate than a free standing net leased bank branch in Chicago. Investors value these properties based on their level of risk, stability, access to debt financing, durability of income, quality of tenant, and condition.
So how do you really know the right one to shoot for?
Unfortunately, there's no one black and white answer, book, guide, or capitalization rate bible that exists. Yes, there are resources that give you ideas where rates have been, but they don't tell you the right one for you.
It works by taking the debt and the cash on cash return you're looking for. You calculate your mortgage constants and equity dividend rates, add the weighted averages of the two together, and presto, you have your target cap rate for the investment you're considering.
For example, your $1,000,000 property is available again. Except, now you're going to borrow $800,000 at 5.5% interest over 25 years. You'd like to earn a 13.23% cash on cash return on your $200,000 investment, so you're wondering, what's your target cap rate?
Your target cap rate for this investment would be 8.54%. This means that if you used an 8.54% rate for this investment, you'd likely be able to pay your lender and yourself the required debt service and cash on cash return.
It's a great tool, but remember, for that cap rate to work for you, make sure that you have a plan to produce a net operating income of $85,412.40 over the next 12 months!
Jeremy Cyrier, CCIM trains people who invest their own money in commercial real estate at CreInvestEd.com. For a copy of the Target Cap Rate Analyzer Tool, click here.
What's a Good Cap Rate to Shoot For?
Many of you may be asking yourselves, "What's a good cap rate to shoot for?"Let's start with defining the capitalization rate, or cap rate for short. The capitalization rate is an investment measure that's defined as the ratio relationship (reflected as a percentage) between the first year's net operating income and the purchase price of your investment.
In plain english, this means that if you pay $1,000,000 cash for a property and you receive $100,000 in cash flow over the next 12 months, your capitalization rate would be 10%.
Or, if you were seeking to purchase property at a 10% cap rate and were considering a $1,000,000 investment, you would you receive $100,000 back in the first 12 months.
Simple, but here's where it becomes complicated.
Cap rates are not the same for any investment property you want to buy or sell. They change across markets and property types. For example, a mobile home park in Alabama will have a different rate than a free standing net leased bank branch in Chicago. Investors value these properties based on their level of risk, stability, access to debt financing, durability of income, quality of tenant, and condition.
So how do you really know the right one to shoot for?
Unfortunately, there's no one black and white answer, book, guide, or capitalization rate bible that exists. Yes, there are resources that give you ideas where rates have been, but they don't tell you the right one for you.
That's why I've developed the Target Cap Rate Analyzer Tool.
It works by taking the debt and the cash on cash return you're looking for. You calculate your mortgage constants and equity dividend rates, add the weighted averages of the two together, and presto, you have your target cap rate for the investment you're considering.
For example, your $1,000,000 property is available again. Except, now you're going to borrow $800,000 at 5.5% interest over 25 years. You'd like to earn a 13.23% cash on cash return on your $200,000 investment, so you're wondering, what's your target cap rate?
Your target cap rate for this investment would be 8.54%. This means that if you used an 8.54% rate for this investment, you'd likely be able to pay your lender and yourself the required debt service and cash on cash return.
It's a great tool, but remember, for that cap rate to work for you, make sure that you have a plan to produce a net operating income of $85,412.40 over the next 12 months!
Jeremy Cyrier, CCIM trains people who invest their own money in commercial real estate at CreInvestEd.com. For a copy of the Target Cap Rate Analyzer Tool, click here.
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If you're using real estate software when investing, take these 5 precautions to make your investing more profitable, enjoyable, and fun while avoiding wasted time and costly mistakes.
1. Verify Your Income/Expense Data. Many of you scrub and qualify property data before you turn on the computer and start crunching numbers. Don't run calculations if your income and expenses are incorrect. You'll get inaccurate results that could cost you hundreds of thousands of dollars.
2. Call Your Lender. Verify that the property you're considering is financially viable. Call your lender to ask about programs, interest rates, amortization periods, and loan terms. You wouldn't want to overpay for a property assuming you could obtain a lower interest rate only to be disappointed later.
3. Plan Your Return Requirements. Financial planners work your retirement plan from the end to the beginning because they calculate the return necessary to hit your goals. Calculate your required yield so you can develop your investment measures: internal rate of return, cash on cash return, cap rate, total return, etc. Now you know whether the investment property you'll be analyzing is high, low, or on the mark.
4. Power Up Your Software. Take your software through its paces before you start running numbers. Be sure to understand the input, outputs, and formulas associated with the program. That way you'll know what's going in, what's going on, and what's coming out.
5. Go for it. Once you've run through Steps 1-4, run your numbers. Real estate investing software saves time when used correctly because it allows you to produce your analysis in minutes. And as you change your assumptions, you quickly see the new, reliable results.
About the Author: Jeremy Cyrier, CCIM trains people who invest their own money in commercial real estate at http://www.CommercialRealEstateInvestingEducation.com. For a free report on residential vs. commercial real estate investing, click here.
How to Use Real Estate Software When Investing
Have you heard the expression, garbage in = garbage out? Don't solely rely on your real estate investing software to analyze a deal, because it does not guarantee that your results will be reliable.If you're using real estate software when investing, take these 5 precautions to make your investing more profitable, enjoyable, and fun while avoiding wasted time and costly mistakes.
1. Verify Your Income/Expense Data. Many of you scrub and qualify property data before you turn on the computer and start crunching numbers. Don't run calculations if your income and expenses are incorrect. You'll get inaccurate results that could cost you hundreds of thousands of dollars.
2. Call Your Lender. Verify that the property you're considering is financially viable. Call your lender to ask about programs, interest rates, amortization periods, and loan terms. You wouldn't want to overpay for a property assuming you could obtain a lower interest rate only to be disappointed later.
3. Plan Your Return Requirements. Financial planners work your retirement plan from the end to the beginning because they calculate the return necessary to hit your goals. Calculate your required yield so you can develop your investment measures: internal rate of return, cash on cash return, cap rate, total return, etc. Now you know whether the investment property you'll be analyzing is high, low, or on the mark.
4. Power Up Your Software. Take your software through its paces before you start running numbers. Be sure to understand the input, outputs, and formulas associated with the program. That way you'll know what's going in, what's going on, and what's coming out.
5. Go for it. Once you've run through Steps 1-4, run your numbers. Real estate investing software saves time when used correctly because it allows you to produce your analysis in minutes. And as you change your assumptions, you quickly see the new, reliable results.
About the Author: Jeremy Cyrier, CCIM trains people who invest their own money in commercial real estate at http://www.CommercialRealEstateInvestingEducation.com. For a free report on residential vs. commercial real estate investing, click here.
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Think of the house as a cow. You raise it, kill it, eat it. Repeat.
If you're tired of the hunt and kill approach and wonder about the advantages of becoming a commercial real estate investor, there are two words you should know - cash flow.
Think of the commercial property as a cow you raise, nurture, and milk.
Here are 4 advantages to becoming a commercial property investor:
Jeremy Cyrier, CCIM trains people who invest their own money in commercial real estate. Free report reveals if it's easier to invest in commercial or residential real estate, visit: http://www.CommercialRealEstateInvestingEducation.com.
4 Advantages of Becoming a Commercial Real Estate Investor
If you've flipped houses, you know it can be a lot of work. And once you've flipped the house, you start over again. It gets old, fast.Think of the house as a cow. You raise it, kill it, eat it. Repeat.
If you're tired of the hunt and kill approach and wonder about the advantages of becoming a commercial real estate investor, there are two words you should know - cash flow.
Think of the commercial property as a cow you raise, nurture, and milk.
Here are 4 advantages to becoming a commercial property investor:
- Empires are built on cash flow. That's why the investors, such as Trump, Zell, Zuckerman, are commercial real estate investors. They know that by applying leverage, the same principles you use when flipping houses, and some planning, you build your commercial real estate empire.
- Cash flow pays you over and over again. Cash flow forgives. Commercial property investors take advantage of the opportunity to survive risk. When they make bad investments, they insure the downside with a recurring base of income. That means they live to make another deal.
- Shelter your income. The IRS allows you take 2 deductions that reduce your tax liability: the mortgage interest deduction and cost recovery (depreciation) deduction. This means that reduce your income taxes by the interest and cost recovery you've taken. You have more money left in your checking account.
- Cash flow + Financial Independence = Time. You have the same 24 hours, 7 days in a week that everyone else does, including the most successful person you know. With your commercial properties providing you with cash flow, you enjoy free time, a meaningful life, relationships, and experiences.
Jeremy Cyrier, CCIM trains people who invest their own money in commercial real estate. Free report reveals if it's easier to invest in commercial or residential real estate, visit: http://www.CommercialRealEstateInvestingEducation.com.
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5 Tips For Buying Your First Piece of Commercial Real Estate
Be careful to follow these 5 tips when you source, qualify, and acquire your first piece of commercial real estate so that it's not your last!
1. Research Your Market: Remember, 80% of your commercial property's performance will be market based. This means that you should have growth in jobs, demand for office and industrial space, household population growth, and increased demand for retail services and housing. If your market is trending the other direction, beware because the other 20% of the equation, your financials, may not equate to profits.
2. Identify Your Return Requirements: Pick your return requirement. Does the deal need to provide you with a cash on cash return (i.e., you invest $1,000,000 and want $100,000 back year after year)?
Or perhaps you want an overall internal rate of return that accounts for how long you hold the property and how much you sell it for? Some people target 12-30% for their yield on investment or their internal rate of return. And remember, just because a commercial real estate investment has a good cap rate, doesn't make it a good deal.
Note: Your cap rate only tells you the first 12 months of the investment's potential story!
3. Identify Your Ideal Property Type: Commercial real estate investments come in 4 types: Retail, Office, Industrial, and Multifamily. Which commercial investment type is right for you? Research the differences between them and you'll see that they all offer distinctive advantages and disadvantages when it comes to management, cash flows, hedging against inflation, maintenance, and growth in the real estate cycle.
4. Qualify the Seller and the Property: You think you're in the real estate investing business, but you're really in the people who own real estate business. Remember, too many people focus just on the property and not enough on the people who own the properties. These folks are the ones with the problems you can solve by buying their commercial property and providing them with a solution that offers you the opportunity for upside value and big profits.
You can make changes to the property now you that understand its position in the market and how to unlock its highest and best use (value) from Step #1.
5. Acquire the Property -- Make Sure You Understand Your Loan: Make sure you read your loan documents. They will be different than when you bought your home and traded those residential investments. Banks make commercial loans and know the tricks to maximize their returns while minimizing their risks when lending you money on your first commercial real estate purchase. Most commercial loans have a loan term, which means that the payments may be calculated on a 20 to 30 year amortization period, most banks want you to either pay off the loan via refinance or sale within 5-10 years.
Many first time commercial real estate investors miss this step and unfortunately discover later in their holding people that they haven't planned for a term maturity. They have to scramble to save their equity and their first building!
If you enjoyed these 5 free tips for buying your first piece of commercial real estate, please leave me a comment below. I read them and appreciate your feedback!
1. Research Your Market: Remember, 80% of your commercial property's performance will be market based. This means that you should have growth in jobs, demand for office and industrial space, household population growth, and increased demand for retail services and housing. If your market is trending the other direction, beware because the other 20% of the equation, your financials, may not equate to profits.
2. Identify Your Return Requirements: Pick your return requirement. Does the deal need to provide you with a cash on cash return (i.e., you invest $1,000,000 and want $100,000 back year after year)?
Or perhaps you want an overall internal rate of return that accounts for how long you hold the property and how much you sell it for? Some people target 12-30% for their yield on investment or their internal rate of return. And remember, just because a commercial real estate investment has a good cap rate, doesn't make it a good deal.
Note: Your cap rate only tells you the first 12 months of the investment's potential story!
3. Identify Your Ideal Property Type: Commercial real estate investments come in 4 types: Retail, Office, Industrial, and Multifamily. Which commercial investment type is right for you? Research the differences between them and you'll see that they all offer distinctive advantages and disadvantages when it comes to management, cash flows, hedging against inflation, maintenance, and growth in the real estate cycle.
4. Qualify the Seller and the Property: You think you're in the real estate investing business, but you're really in the people who own real estate business. Remember, too many people focus just on the property and not enough on the people who own the properties. These folks are the ones with the problems you can solve by buying their commercial property and providing them with a solution that offers you the opportunity for upside value and big profits.
You can make changes to the property now you that understand its position in the market and how to unlock its highest and best use (value) from Step #1.
5. Acquire the Property -- Make Sure You Understand Your Loan: Make sure you read your loan documents. They will be different than when you bought your home and traded those residential investments. Banks make commercial loans and know the tricks to maximize their returns while minimizing their risks when lending you money on your first commercial real estate purchase. Most commercial loans have a loan term, which means that the payments may be calculated on a 20 to 30 year amortization period, most banks want you to either pay off the loan via refinance or sale within 5-10 years.
Many first time commercial real estate investors miss this step and unfortunately discover later in their holding people that they haven't planned for a term maturity. They have to scramble to save their equity and their first building!
If you enjoyed these 5 free tips for buying your first piece of commercial real estate, please leave me a comment below. I read them and appreciate your feedback!
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Here's a big hint of what this means to you. Your financing options have moved from Wall Street to Main Street. Take your local banker out to lunch and nurture that relationship. You're going to need it because while you're building your commercial real estate investment portfolio in a down market, you'll need to borrow money to grow your wealth.
What else does big change this mean for you? The days of buying property and believing that an exit in 2-3 years with a big return from appreciation are over until the next expansion cycle. It's time to return to buying property based on core fundamentals built around cash flows: solid, real, positive cash flows.
If you buy for cash flow and you focus on the fundamentals, the exit will take care of itself, your deal will be financible, and you'll get your original investment back more quickly-something everyone's concerned about these days.
A quick look at the math will demonstrate that purchasing for cash flow works. Let's start with the purchase price. You decide to purchase a property for $1,000,000. You deposit $250,000 as your down payment and earn a 10% cash on cash return on your investment. This investment will pay you $25,000 in the first year and as the rent increases, so will your cash on cash return. Plus, while you're holding the property, your $750,000 loan is amortizing or being reduced by your rental income. This means that you're recovering your down payment while you pay down the debt.
At the end of the 10 years, you sell the building for $1,000,000. That may not seem like a great deal to some, but if you've already recovered your $250,000 in cash flow and paid down your mortgage by $100,000, you're walking away from the closing with a check for $350,000 plus the $250,000 you already got back. My simple math may be wrong, but you more than doubled your money.
If you focus on the fundamentals first, buy for cash flow. Empires are built on durable, long-term cash flows. Once you have that in place, go out and play. You can afford to make mistakes because you have a base cash flow to insure your survivability.
About the Author:
Jeremy Cyrier, CCIM trains people who invest their own money in commercial real estate at http://www.CreInvestEd.com. For more commercial real estate investing tips, visit http://www.commercialrealestateinvestingeducation.com.
Tips for Investing in Positive Cash Flow Properties
Money...It seems to be all anyone cares about these days. It's all over the news and all we're hearing about is the implosion and consolidation of the banking industry.Here's a big hint of what this means to you. Your financing options have moved from Wall Street to Main Street. Take your local banker out to lunch and nurture that relationship. You're going to need it because while you're building your commercial real estate investment portfolio in a down market, you'll need to borrow money to grow your wealth.
What else does big change this mean for you? The days of buying property and believing that an exit in 2-3 years with a big return from appreciation are over until the next expansion cycle. It's time to return to buying property based on core fundamentals built around cash flows: solid, real, positive cash flows.
If you buy for cash flow and you focus on the fundamentals, the exit will take care of itself, your deal will be financible, and you'll get your original investment back more quickly-something everyone's concerned about these days.
A quick look at the math will demonstrate that purchasing for cash flow works. Let's start with the purchase price. You decide to purchase a property for $1,000,000. You deposit $250,000 as your down payment and earn a 10% cash on cash return on your investment. This investment will pay you $25,000 in the first year and as the rent increases, so will your cash on cash return. Plus, while you're holding the property, your $750,000 loan is amortizing or being reduced by your rental income. This means that you're recovering your down payment while you pay down the debt.
At the end of the 10 years, you sell the building for $1,000,000. That may not seem like a great deal to some, but if you've already recovered your $250,000 in cash flow and paid down your mortgage by $100,000, you're walking away from the closing with a check for $350,000 plus the $250,000 you already got back. My simple math may be wrong, but you more than doubled your money.
If you focus on the fundamentals first, buy for cash flow. Empires are built on durable, long-term cash flows. Once you have that in place, go out and play. You can afford to make mistakes because you have a base cash flow to insure your survivability.
About the Author:
Jeremy Cyrier, CCIM trains people who invest their own money in commercial real estate at http://www.CreInvestEd.com. For more commercial real estate investing tips, visit http://www.commercialrealestateinvestingeducation.com.
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For instance, an interested party comes to your building and makes you an offer. You review the offer and it’s full of contingencies, has unacceptable pricing, terms, and conditions, but after thinking about it, you’re intrigued and want more. You tell the interested party to rework the offer and come back with more information about what they’d like to do, perhaps a higher price, maybe better terms.
A few days pass, and your interested party submits a partial list of responses for you, verbally. You review the changes, ask for more information, maybe give them a “that could work” to a term and send them on their way. A few more days pass, and they come back. You repeat. They repeat. You repeat again. A month has gone by. Maybe two.
Then you’re out to dinner with a friend, and he asks you how it’s going with your property. You tell him that it’s going well because you have an interested party you’ve been talking to. Your friend asks you, “did you do the deal?”
You don’t know. You don’t have a deal. You’re in the do loop–an endless negotiation.
When you’re in the do loop, you go ’round and ’round, because neither you, or the interested party has succeeded in isolating the variables in your negotiation. This situation will continue until either you decide this negotiation is a waste of time, or you break the do loop. Unfortunately, do loop discussions usually end in someone dropping out because there’s no end in sight.
To break the do loop, end the endless talk by establishing constants in your negotiations. Take a position, make a commitment, and move forward. Ask your interested party to do the same. You’ll find that you start making headway and will be in a position to make an informed decision about the sale or lease of your property.
How to End, Endless Investment Property Negotiations
Time kills all deals, right? Yes, but to make deals happen, you must avoid time’s accomplice, the do loop. We enter do loop unaware and full of good intentions, but what we have is an endless negotiation or circle of discussions that accomplishes nothing except to make us feel as though we’re accomplishing something.For instance, an interested party comes to your building and makes you an offer. You review the offer and it’s full of contingencies, has unacceptable pricing, terms, and conditions, but after thinking about it, you’re intrigued and want more. You tell the interested party to rework the offer and come back with more information about what they’d like to do, perhaps a higher price, maybe better terms.
A few days pass, and your interested party submits a partial list of responses for you, verbally. You review the changes, ask for more information, maybe give them a “that could work” to a term and send them on their way. A few more days pass, and they come back. You repeat. They repeat. You repeat again. A month has gone by. Maybe two.
Then you’re out to dinner with a friend, and he asks you how it’s going with your property. You tell him that it’s going well because you have an interested party you’ve been talking to. Your friend asks you, “did you do the deal?”
You don’t know. You don’t have a deal. You’re in the do loop–an endless negotiation.
When you’re in the do loop, you go ’round and ’round, because neither you, or the interested party has succeeded in isolating the variables in your negotiation. This situation will continue until either you decide this negotiation is a waste of time, or you break the do loop. Unfortunately, do loop discussions usually end in someone dropping out because there’s no end in sight.
To break the do loop, end the endless talk by establishing constants in your negotiations. Take a position, make a commitment, and move forward. Ask your interested party to do the same. You’ll find that you start making headway and will be in a position to make an informed decision about the sale or lease of your property.
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Here they come….the emails you’ve been waiting for. You open them. You see a pattern. These commercial property listings are all the same. You chock it up to the fact that you contacted the commercial real estate brokers at the same time and they’re sending you what’s available on the market. A few weeks go by, and the investment property sales lists dwindle and no agents are calling. What happened?
You’re every commercial broker’s business and no broker’s responsibility.
Rewind a few weeks. You’re a commercial real estate broker. You receive a phone call from an investor who’s looking for a good deal in your market. He wants you to send him a good investment property to buy, so keep your eyes open and start hunting. You want a commission right?
Well, sure. But here’s the catch. You get at least one phone call like that every day. You’re asked to find a good deal for this investor, maybe go hunting for him, and start sending him listings. He’s probably not a hot horse who’s going to buy a property off the first list you send him and he’s likely having the same conversation with other investment property brokers in your market.
He’s everyone’s business and no one’s responsibility.
You add him to your database. Maybe you put him in your email distribution list and figure that something might happen, but if not, you may get a call one day when he has a property he needs to lease or sell is commercial property.
After a few weeks, you stop sending him lists of investment properties for sale because you’ve also been asked by 15-20 other investors in the same period of time to do the same activity. Somehow, they think you’re out there working for them, too, because they’re getting the same listings as everyone else. What they don’t know is that no commercial broker’s out there hunting, they’re just entering a search and clicking the send button.
You’ve been selling investment properties long enough to know that most of these calls are a fool’s errand. The promise of a commission looms on the horizon, but you know you’re going to have to spend more in time and resources to maybe get that commission than you’ll likely earn, plus you have no commitment from any one investor that they’ll honor your commission if you bring them a commercial real estate investment opportunity. Pretty risky if you’re a broker. You decide you’re better served investing in those who have hired you to help them acquire and dispose of investment property.
Ultimately, as an investor, ask yourself, when you repeat the same behaviors as everyone else by calling a bunch of brokers to tell them what you want, should you expect an outcome that’s different than everyone else who’s doing the same?
The next time you’re on the phone with a commercial broker, try asking him how many calls he’s had from investors “looking for a good deal” in the last 30 days. Then ask him how many of those investors he’s spoken to after the initial conversation. Chances are you already know the answer.
To get different results than everyone else, change your approach. Ask your investment property brokers how many investors they’re representing. The ones who have clients are getting deals done, while the ones who aren’t….well, just check your email box for the latest commercial property listings.
By taking a different approach and employing an investment property broker to execute a search and acquisition on your behalf, you may be delighted that when you become someone’s responsibility, you’re everyone’s envy.
Why Your Commercial Real Estate Broker Doesn’t Find You Deal
You call commercial real estate brokers in your market, tell them about what you’re looking for, and meet with a few. It feels like you’re making progress. The word is on the street, you’re looking to buy a commercial real estate investment property with great cash flows, upside potential, and at distressed prices. Every commercial real estate broker knows. You wait by the phone and check your email for the wealth building deals to roll in.Here they come….the emails you’ve been waiting for. You open them. You see a pattern. These commercial property listings are all the same. You chock it up to the fact that you contacted the commercial real estate brokers at the same time and they’re sending you what’s available on the market. A few weeks go by, and the investment property sales lists dwindle and no agents are calling. What happened?
You’re every commercial broker’s business and no broker’s responsibility.
Rewind a few weeks. You’re a commercial real estate broker. You receive a phone call from an investor who’s looking for a good deal in your market. He wants you to send him a good investment property to buy, so keep your eyes open and start hunting. You want a commission right?
Well, sure. But here’s the catch. You get at least one phone call like that every day. You’re asked to find a good deal for this investor, maybe go hunting for him, and start sending him listings. He’s probably not a hot horse who’s going to buy a property off the first list you send him and he’s likely having the same conversation with other investment property brokers in your market.
He’s everyone’s business and no one’s responsibility.
You add him to your database. Maybe you put him in your email distribution list and figure that something might happen, but if not, you may get a call one day when he has a property he needs to lease or sell is commercial property.
After a few weeks, you stop sending him lists of investment properties for sale because you’ve also been asked by 15-20 other investors in the same period of time to do the same activity. Somehow, they think you’re out there working for them, too, because they’re getting the same listings as everyone else. What they don’t know is that no commercial broker’s out there hunting, they’re just entering a search and clicking the send button.
You’ve been selling investment properties long enough to know that most of these calls are a fool’s errand. The promise of a commission looms on the horizon, but you know you’re going to have to spend more in time and resources to maybe get that commission than you’ll likely earn, plus you have no commitment from any one investor that they’ll honor your commission if you bring them a commercial real estate investment opportunity. Pretty risky if you’re a broker. You decide you’re better served investing in those who have hired you to help them acquire and dispose of investment property.
Ultimately, as an investor, ask yourself, when you repeat the same behaviors as everyone else by calling a bunch of brokers to tell them what you want, should you expect an outcome that’s different than everyone else who’s doing the same?
The next time you’re on the phone with a commercial broker, try asking him how many calls he’s had from investors “looking for a good deal” in the last 30 days. Then ask him how many of those investors he’s spoken to after the initial conversation. Chances are you already know the answer.
To get different results than everyone else, change your approach. Ask your investment property brokers how many investors they’re representing. The ones who have clients are getting deals done, while the ones who aren’t….well, just check your email box for the latest commercial property listings.
By taking a different approach and employing an investment property broker to execute a search and acquisition on your behalf, you may be delighted that when you become someone’s responsibility, you’re everyone’s envy.
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The problem is that too many commercial real estate investors make the mistake of mishandling the transition of the meeting of the minds to the written word.
They short circuit their deal by circulating a written agreement that introduces new terms, pricing, and conditions that have not been discussed or agreed upon.
2. Prepare each party's expectations for legal term negotiations. Set expectations that the legal terms of the agreement will be revised so that your deal will have a greater likelihood of a successful outcome.
3. If business terms reemerge, stop negotiating your legal terms and obtain consent from all parties to revisit your initial discussions. Be open and notify all involved that the conversation has changed. You will build trust and emotional capital in your transaction that you can use to navigate challenges that will arise later in your deal.
Once agreed, circulate a final copy of the written agreement for signatures and keep your deal moving.
3 Deal Survival Tips in Commercial Real Estate Investing
Many of you would like to close more commercial real estate deals but see your commercial real estate opportunities crushed when the first agreement is circulated.The problem is that too many commercial real estate investors make the mistake of mishandling the transition of the meeting of the minds to the written word.
They short circuit their deal by circulating a written agreement that introduces new terms, pricing, and conditions that have not been discussed or agreed upon.
Here are 3 steps to ensure that your deal survives the transition of the meeting of the minds to the written word.
1. Break down your agreement into business terms and legal terms. Negotiate your business terms in great detail. Thoroughly. Create a term sheet to document the agreement. Have all parties sign off on the term sheet.2. Prepare each party's expectations for legal term negotiations. Set expectations that the legal terms of the agreement will be revised so that your deal will have a greater likelihood of a successful outcome.
3. If business terms reemerge, stop negotiating your legal terms and obtain consent from all parties to revisit your initial discussions. Be open and notify all involved that the conversation has changed. You will build trust and emotional capital in your transaction that you can use to navigate challenges that will arise later in your deal.
Once agreed, circulate a final copy of the written agreement for signatures and keep your deal moving.
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Here's a free checklist for you to use the next time you're wondering whether hiring a commercial real estate broker is really for you.
Top 10 Reasons Not to Hire a Commercial Real Estate Broker
10. You can save the commission.
9. You have found tenants for your building in the past. You can do it again, filling your space for market rents, faster than your neighbors.
8. No one represents you better in a negotiation than you. You're objective and rarely lose your cool.
7. Marketing your opportunity won't be a problem. You know everyone in your commercial real estate investment market.
6. You made your money from off-market deals. In fact, you've never bought a property listed by a commercial real estate broker.
5. You know the best lenders, commercial real estate attorneys, commercial real estate lenders, architects, engineers, environmental engineers, and construction firms in your commercial real estate investment market.
4. You have your CCIM designation.
3. You have a career's worth of experience in commercial real estate investing.
2. You spend 8-12 hours every weekday speaking with property owners, lenders, tenants, and commercial real estate brokers in order to stay current on the market and ahead of the best commercial investment property opportunities.
1. Your commercial real estate investing has fared well, there's absolutely nothing you would change, improve or could do better.
Top 10 Reasons Not to Hire a Commercial Real Estate Broker
Working with a commercial real estate broker is not for everyone. Commercial real estate investors and tenants choose not to hire a commercial real estate broker for several reasons.Here's a free checklist for you to use the next time you're wondering whether hiring a commercial real estate broker is really for you.
Top 10 Reasons Not to Hire a Commercial Real Estate Broker
10. You can save the commission.
9. You have found tenants for your building in the past. You can do it again, filling your space for market rents, faster than your neighbors.
8. No one represents you better in a negotiation than you. You're objective and rarely lose your cool.
7. Marketing your opportunity won't be a problem. You know everyone in your commercial real estate investment market.
6. You made your money from off-market deals. In fact, you've never bought a property listed by a commercial real estate broker.
5. You know the best lenders, commercial real estate attorneys, commercial real estate lenders, architects, engineers, environmental engineers, and construction firms in your commercial real estate investment market.
4. You have your CCIM designation.
3. You have a career's worth of experience in commercial real estate investing.
2. You spend 8-12 hours every weekday speaking with property owners, lenders, tenants, and commercial real estate brokers in order to stay current on the market and ahead of the best commercial investment property opportunities.
1. Your commercial real estate investing has fared well, there's absolutely nothing you would change, improve or could do better.
