Commercial Real Estate Investing For Dummies. Peter Harris

profit without having to actually own, fixup or manage anything! That’s why wholesaling can be a great way to get started investing in commercial real estate.

      Snagging a Good Deal from Lazy Landlords

      Good deals are deals that make you money with less to no hassle, right? So, if you can find a property where the landlord hasn’t been paying attention to the market or just hasn’t bothered to raise the rent, you can get the property under contract, raise the rents, and reap the benefits.

These types of properties are known as lazy landlord properties. This is one big advantage of working the Branch One side of commercial properties. Once a property is listed with a broker, (we call these Branch Two properties) it’s likely the broker will let the owner know the rents are below market. Once this happens, you’ve lost most of your ability to base your purchase price on the (lower) current rental amounts. Every time we do a rent survey, I’m pleasantly surprised to find that there’s still owners out there who don’t bother to keep their rents up at market rates.

      Some of them just don’t know they could be getting more. We’re sure some of them simply don’t care. It’s easier for them to keep the rents low so they don’t ever have to deal with any turnover. As we just mentioned, after a broker gets a listing, they will either encourage a lazy landlord to increase the rents, or they’ll price the property based on proforma rents. “Just raise the rents and this will be worth what we’re asking for it,” Is what we’ve heard hundreds of times.

      

The advantage of going direct to the owners and getting the property from them before a commercial broker enters the picture is huge. With the right lazy landlord property, you can get it under contract just below, or in some cases right at the actual value and come out okay. The reason is that if the rents are far enough below market, you can work the spread between the current actual value and the proforma value of the property.

      

Increasing the NOI (net operating income) causes the property value to go up by a large factor. Carve out a piece of this increase in value for yourself as your wholesaling fee, and you’re off to the races. Your buyers will love deals where they can get in and then raise the value of the property by increasing the rents.

      Choosing the right neighborhoods

      The ideal property to wholesale will be in a decent neighborhood. You don’t want to bring your buyers properties with wonderful looking numbers that are located in an undesirable area. These days it’s very easy to check the crime statistics online to see if the property is located in a dangerous neighborhood. A property in a place with high crime rate is going to be difficult for almost anyone to operate effectively, so don't do it.

      You want to be known as the person who provides contracts on decent properties in good areas, not the one who gets horrible properties under contract to pass along to your buyers. You don't want that reputation, so remember to look for good neighborhoods, and make sure you have it under contract either below the current or the proforma value. This way, you have value that you’re providing to your buyers, and they will become easier and easier for you to work with as they get to know and trust that you’re leaving enough money on the table for them.

Acquiring the Tools of the Trade

      Here’s what you need to get started wholesaling commercial real estate. It's a simple way for anyone, regardless of their background or experience to get their foot in the door with commercial real estate.

       A versatile laptop. You’ll use it to access Facebook groups, online forums, and send emails. Some investors prefer to use a tablet or even just their cell phone for these tasks.

       A reliable cell phone (with a decent headset). You can get by without the headset, but headphones make it easier to talk on the phone while you’re out walking, exercising, or taking your kids to school.

       Specialized knowledge. You’re getting a great start by reading this book.

      Let’s answer a question that we hear a lot: What can I do to make sure I'm successful in commercial real estate? The answer is to get as much specialized knowledge as you can. Take some time to write out your goals along with an actual description of what you’re going to experience can be very powerful. Make sure to list out what it’s going to be like when you have a big commercial property. Include everything you’ll see, hear, and feel as you walk up to your building, your big apartment building. Take a moment each night right before you go to sleep to read through this description of your future, the one that you know is waiting there for you. We want you to see yourself doing it. See yourself enjoying the freedom and the new lifestyle you’ve created.

      

You’re going to need persistence to succeed with commercial real estate. It's not an easy business. If it was, then everybody would be doing it. But if you stick with it, we’re here to let you know that you’re going to change your life. Start out by doing what's necessary; then work on doing what’s possible; before you realize it, you’ll find that you are doing the impossible. We hope that you have fun wholesaling your first commercial deal as you’re getting started investing in commercial real estate.