While a memorable and potentially life-changing experience, buying your first commercial property is usually the most difficult commercial property you’ll ever buy.
Purchasing your first commercial property isn’t just a matter of luck: There are specific steps you can take to ensure success.
1. Understand Exactly What You Want to Buy
Did you know that there are several different types of commercial property? You don’t need to limit yourself to buying multi-family homes.
Some notable examples of commercial real estate property types include office complexes, warehouses, distribution centers, apartment complexes, and even commercial land.
Some properties may be more difficult to invest in than others.
For instance, there might be plenty of motels available for sale in your neighborhood, but do you know anything about running one? Stick to what you’re good at.
2. Consider Ways to Lower Your Risk
Choosing and researching the right property type to invest in will go a long way in reducing risk and effectively investing your money.
Some commercial property types are riskier than others.
For instance, if you’re looking for restaurants to invest in, you might run into the problem of having to open one yourself or find someone else who can.
This can be contrasted to running a car wash business. They are vastly different and have their own ways of financial success or failure.
3. Acquire Financing Early
Unless you’re a Powerball lottery winner, the odds are good that you’ll need financing. But financing can come with its own unique sets of problems. For starters, you must make yourself look good to your lender. Shop around.
One of the main reasons why commercial real property financing gets delayed is that first-time borrowers often fail to understand the documentation needed for obtaining financing. Do your research first before talking to lenders.
And, before requesting financial help from a lender, you’ll want to ensure that your own personal finances are in good shape.
4. Research Smartly
When buying your first commercial building, it’s important to look into the details. You need to know exactly what you’re doing.
You need to get out from behind the computer and look for real estate deals. Ideally, your first commercial real estate deal should happen close to your own personal residence. Say you live in Dallas Texas. For your first purchase, you will likely want to buy your commercial property in Dallas.
Sometimes it is best to invest in areas that you know. For example, you understand the traffic might be there, which is something most newcomers often overlook when they’re trying to decide whether or not to invest in CRE.
5. Negotiate Fairly
It’s one of the most difficult things about commercial real estate is just how vast yet small this industry is.
For example, when buying real estate, are you trying to win by closing on a deal, or are you more interested in making sure you don’t lose?
Here are some things to consider:
- There are two main differences between getting the agreement through a win-win negotiation and obtaining the agreement by bullying the other party into submission.
- One sale is great, but building long-term relationships allows you to accumulate multiple sales over time, which is much more lucrative.
- Sometimes a deal requires you to compromise. Make the best out of it and move forward.
- Understanding what the seller wants can help you negotiate better prices.
These are some things you need to know before negotiating for the first time. Don’t expect perfect results from the first deal.
Some Additional Tips to Be a Successful CRE Investor
Networking
Networking may not be among the top five ways to get started investing in real estate, but networking is still important. Why?
There are two main reasons why you should invest time in developing your personal network.
You shouldn’t go it alone because it isolates you from others who might be able to help you out. Everyone needs to learn from someone else at some point in the process. If it were possible for people to be completely cut off from each other, nobody would ever share anything.
Two, you don’t always understand what you don’t understand, and being involved in the commercial real estate industry gives you exposure to new ideas, new assets to explore, and lots of help.
People who sell real estate love talking about real estate, so it won’t be like you’re making their lives complicated by questioning them about something they enjoy.
Building Trust
Start by doing something. Don’t worry if it doesn’t go perfectly. You’re not going to be able to make every single thing right at once. Just keep trying until you feel comfortable enough to take risks.
Many seasoned commercial real estate professionals will tell you that a good deal is always difficult. However, trying to get an excellent deal where everything goes perfectly isn’t going to help you become a successful investor.
Many people who started out investing in commercial real estate continue to invest in commercial real estate today because they didn’t allow the failures to stop them from continuing to pursue their dreams.
You can become one of them, but it requires effort and hard work.
Review Tips for Buying Your First Commercial Property.