In today’s crazy and opportunistic real estate market, more and more investors are looking to take their knowledge and experience and either break into commercial real estate or maximize the opportunities already presented to them. The key in commercial real estate is very similar to residential investing: finding the deals that no one knows about! There are three ways to find those pocket commercial deals by contacting the people that work in that field: property managers, commercial real estate brokers, and commercial lenders.
The best way to reach out to commercial property managers is to first call them as a commercial owner. If you don’t own one, PRETEND to own one! It’s always nice to start off finding how many properties they manage, what their fees are, experience, and areas of management. I always like to ask almost like it’s just an afterthought. “Oh, do you know any of your property owners that are looking to sell their properties?” Property managers are often the very first to know of problem properties, owners in trouble, and owners ready to sell. Quite often you will be the first one to approach the owners and can often lock up a property without it ever hitting the MLS or LoopNet. Property managers are critical because they can give you all the specific information on a property such as rents, occupancy, expenses, and overall condition of the property. More importantly they know the problems of a property which can be the difference between a deal and a dud!
One of the “duhs” in the business of finding commercial deals is to contact commercial real estate brokers. Commercial brokers are a different breed of realtor as they specialize in commercial deals and you don’t want to waste your time working with a realtor who doesn’t as they will slow you down and show you properties that often don’t fit what you are looking for.
Several ways for you to identify commercial brokers is to check out Realtor.com along with one of my favorite websites, www.ActiveRain.com. It’s important to know exactly what you are looking for when talking to these individuals as they can quickly sort out what you want and prefer it that way versus just saying “a deal.” You might want to say, “I’m looking for class B and C multifamily units in the Dallas area that are 50 units or greater and are at an 8 cap or greater.
I’ll even look at non-performing or trouble properties if I can get preferential financing.” This gives the agent a specific idea of what you are looking for allowing them to talk to their contacts along with evaluating any pocket listings that they might. Often commercial realtors will often have a bevy of pocket listings or sellers that are waiting for the right offer without actually listing the property for sale. This is important to keep in mind and to talk to several commercial realtors if you are just diving into a new area that you are looking to invest in as most commercial brokers will often specialize in different areas of commercial real estate but are well networked with other peers. A great commercial broker will often know what the seller is willing to accept along with being open to creative ways and financing such as owner carry backs, master leases, and rent guarantees. Commercial agents can think outside the box!
The third source to find commercial deals is my favorite way to find deals. Contacting lenders, primarily small banks and hard money lenders is a way to find and kill three birds with one stone. These three birds are REO’s (foreclosed properties that the bank has taken back), defaulted commercial loans (mortgages or liens that you can purchase and control the property with), along with lending criteria. You should contact hard money lenders and banks that specialize in commercial lending and find out what they have as far as REO’s and defaulted paper that they would be willing to get off of their books. These properties often become or are discounted so that they are attractive to investors immediately. Oftentimes, hard money lenders are often willing to finance the purchase of their problem properties if an investor is looking to put something down. You will often find preferential lending terms, not to mention phenomenal deals by taking the time to call a list of hard money lenders and commercial banks.
While these three sources to find deals would seem to be common sense, many investors fail to take the time to contact these sources. It’s not only important to take the action to contact them, but to follow up with them on a regular basis to see what deals they become aware of or know of. The answer you will often get is, “I don’t know of anything currently, but check back with me.” Commercial deals can come and go faster than residential deals, so be prepared to act quickly and develop a successful follow up system. The ability to take action and follow up is what truly separates successful investors from regular investors. Don’t get caught losing deals because you were afraid to pick up the phone to call these great sources. Take the time now to make those calls today to take advantage of this phenomenal market and find yourself miles ahead of your fellow investors that “wished” they could find a way to break into commercial investing.