In commercial real estate you must have a Narrow Niche Focus in order to be a successful investor. You absolutely need to know what type of property of what size, age and condition you are looking for and what you intend to do to add value once you buy it. It is basically a case of Focus or Fail.
If you look at every commercial property on the market – cruising LoopNet for hours looking for a “good deal” – you are totally wasting your time. This goes against what many of us Residential Real Estate Investors were taught when they we are buying single family houses. Many single family investor buyers look for the “motivated seller”. They'll look at any property they can purchase at a wholesale price, no matter where it is, what size it is or how much it costs.
You cannot apply the “I'll look at anything with meat on the bones” mentality to the Commercial Real Estate side, you will do poorly in commercial investing.
More About Commercial Real Estate
There are so many different Property “Flavors”. Commercial is like an all-you-can-eat buffet compared to the vending machine of Residential Property.
Different Asset Types, business plans, neighborhoods, market forces… if you don't have a Narrow Commercial Focus you will be like a kid in a candy shop. You will literally waste thousands of hours of your time and never become an expert … never build that profitable portfolio.
Here's an Example of a Narrow Commercial Focus…
– 75 to 150 units
– Built in 1970's and 1980's – Class “B” – “C”
– Vacancy rate of over 15%, only minor rehab needed, economic loss 25% or more
– Business plan is economic reposition with quality local property management. Raise rents and occupancy to the market rates, cosmetic rehab, hold for three to five years and sell on the improved Net Operating Income
With this level of Focus, you can clearly see when a property is in your Sweet Spot and when you can say “Pass”.
Benefits of Having Narrow Commercial Investing Goals
When you are focused on a specific property and a specific business plan four things will happen very quickly. Commercial Investing articles and videos may help you with narrowing your focus. Here are a few helpful tips to help you achieve your commercial investing goals.
1. Find the Right Market(s)Quickly
With your tight focus you can quickly find the best Markets and best neighborhoods in those Markets for your chosen Niche.
2. You will be much more effective at screening opportunities.
The tight niche focus will allow you to quickly identify the properties that are in your Niche and say “yes” or “no” to further research instantly. You will toss any deal that is not a fit and be focused immediately on the lucrative deals that DO meet your niche criteria.
3. You will become an Expert in your Niche, very quickly.
The tighter your focus the more quickly you can wrap your brain around all the variables in that Asset Type, Asset Class and Business Plan. You will quickly learn the success factors and things to avoid in your specific properties. Only a tight focus will allow this rapid accumulation of expertise.
4. You will be able to build a Niche Focused Team.
When you can tell your team of Brokers, Mortgage Brokers, Property Managers and Field Partners EXACTLY what you are looking for they'll be able to bring you quality leads very very quickly.
Three Steps to Pick Your Commercial Niche
1. Choose an Asset Type
Retail, Office, Multi-Family, Industrial, Hospitality, Development
2. Choose an Asset Class
Do you want a brand new, fully rented up, modern, Class “A” building to buy and hold for a steady return?
Or or something that's a little older … maybe Class “C” with some problems you can fix to force additional appreciation?
3. Choose a Business Plan
Is this a Buy And Hold
Are you going to do an Economic Reposition
A Rehab Project
A Re-purposing – warehouse to residential condos?, what is your business plan?
Commercial Investing Tip For Residential Real Estate Investors
Here are some simple exercises that will help get you focusing on the right type of commercial assets for your investing goals:
Review & Pick a Asset Class
Study Asset Types & pick one best suited for your investing tolerance
Devise a plan to acquire, add value and an exit strategy.
Hope this commercial investing real estate investing blog's tips were helpful for some of you and feel free to LEAVE A COMMENT below if you have any questions or just want to say “Hi”….until next deal, Camille