How Do I Get Started Investing in Commercial Real Estate?

Where do you start to begin profiting from commercial real estate investments?

It’s one of the most common questions we get – “how do I get into commercial real estate?” Many individuals and families are drawn to commercial property as a way to diversify investment portfolios, to get ahead financially, generate extra income, and to upgrade from simply buying single family rental properties and becoming a DIY landlord. So where do you start?

Don’t be confused by ‘Commercial’

On the surface commercial real estate can seem confusing and even daunting for many. There may be new things to learn, and new connections to make, but don’t be overwhelmed. In reality commercial real estate investing isn’t that different from the mechanics of other types of property transactions, and in many ways it can actually be easier to acquire and manage, if you’ve got the right help.

Step One: Take Inventory

The first step is to take stock of yourself and your resources. This will help refine your focus, path, and strategy, as well as enabling professionals to better help you.

Ask and answer:

  • Why do I want to invest?
  • What specific results do I hope to achieve?
  • What’s my timeline?
  • What types of properties do I know about?
  • What skills, talents, and knowledge do I have, or need to add?
  • How much time do I have?
  • How much money can I access to invest?

Talk to Commercial Real Estate Experts

Pick up the phone, or arrange a meeting with some local commercial property professionals. Bring them your above answers, let them fill you in on the current market and trends, and make some recommendations on where it might be best for you to start focusing.

Find out about demand for property assets and leased units, different property types, financing, and tax saving tools and vehicles.

Interview commercial real estate brokers, title insurance reps, business and mortgage loan officers, attorneys, and others. Find a good match in partners who take the time to figure out what’s really important to you, and who you can build a long term relationship with.

While it is possible to head out there and try to find properties, and make offers on your own, it is worth noting that if you check the property transaction records in any top city like New York, savvy and sophisticated investors and funds almost exclusively use third party real estate brokers. That applies no matter how much experience they have, how many billions in revenues they earn, and regardless of whether they have teams of hundreds or more in-house. Brokers can do things they can’t, they can add a ton of value and expertise, and provide a critical buffer from risk and liability.

Start Honing In

Next, start zoning in on the options available in the area you want to invest in, the type of property you want to invest in, and the price point you are most interested in.

For many this may be small multifamily properties and small apartment complexes. They can offer increased profitability ‘per door’, more diversification, ease of management, lower volatility, multiple exit strategies (including condo conversions), and most individuals know this asset class best. Almost everyone has rented an apartment at some point in their lives, and that can help a lot versus diving headfirst into something like industrial property.

What’s Next?

Check out Part 2 in this series to learn about how to find, evaluate, and buy commercial properties, followed by how to select the best properties for you, and maximize the upside potential.

Ready to invest now? Get in touch with Yellowtail today…