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Commercial Real Estate Investing: 5 Steps to Buying Your First Property - YouTube
Channel: Tyler Cauble
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today I'm going to show you how to get
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started in commercial real estate
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investing with five steps to buying your
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first property in fact it's the same
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strategy that I used in 2019 to acquire
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for office buildings here in Nashville
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so if you're interested in commercial
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real estate investing you're going to
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love this step-by-step guide step 1
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choose your niche and become the expert
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first educate yourself on commercial
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real estate you need to decide what you
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want to do and focus on that there are
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many shiny objects in commercial real
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estate and that's one of the beautiful
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things about this industry and while
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diversifying your portfolio is certainly
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an important aspect of commercial real
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estate investing I recommend that you
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dial it in and become the expert on one
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specific type of investing first now the
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most you'll ever learn about commercial
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real estate investing is actually during
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and after you've done a deal some parts
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of the investing process just can't be
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captured in a book or video however you
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need to have a decent understanding and
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roadmap for your investment strategy
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there are so many ways that you can go
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about educating yourself on commercial
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real estate you can listen to podcasts
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read commercial real estate books I'm
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actually going to leave you guys a link
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on my 10 favorite books in the show
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notes below you watch videos on youtube
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like this one have conversations with
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other investors you know learn from
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people who have done it already
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join real estate investing groups and
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you know what you might even get a job
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in commercial real estate that's what I
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did
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I got my start as an in-house leasing
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agent for a boutique development firm in
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the four and a half years that I was
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there I learned how to build
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single-family homes
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develop townhome projects managed office
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retail and industrial properties and how
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to master plan communities it would have
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taken me a lifetime to learn that any
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other way and I got paid to do it ok so
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after you've educated yourself on
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commercial real estate investing it's
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time to choose a property type and the
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reason that I recommend you choose the
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property type after you've educated
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yourself on commercial real estate is
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that you don't necessarily know which
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property type will be right for you
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before you get started for example if
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you're a single-family residential
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investor you've probably heard the next
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step in commercial real estate investing
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is buying multifamily apartment
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complexes but did you know that storage
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units which are a subclass of industrial
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real
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stay pretty much operate the same way as
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multifamily but without the headache of
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dealing with residential tenants you may
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find another asset type that is more
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attractive to you as an investor so
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choose a property type there are five
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primary types of commercial real estate
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that you can invest in number one
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multifamily that's anything from a
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single duplex with two units to hundreds
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of units spread across a garden style
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apartment complex number two office
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space office buildings can be as small
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as a commercially zoned home housing an
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attorney's office or skyscraper downtown
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number three retail retail real estate
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can be anything from that Starbucks
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around the corner from your house to a
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massive regional shopping center number
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four industrial real estate industrial
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real estate is made up of warehouses and
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distribution centers so think Amazon
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delivery number five hospitality
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Hospitality real estate are the hotels
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and motels that serve business and
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leisure travelers short-term rentals are
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often included here too so after you've
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determined which property type is right
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for you it's time to decide on an
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investment strategy there are many
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different investment strategies and just
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like choosing a property type it's
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important to find a strategy that's
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right for you depending on your goals
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and what piques your interest you may
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find yourself land banking when banking
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is where you purchase larger tracts of
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land that are in the path of development
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with the hope that they will appreciate
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in value as the development moves
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towards you development commercial real
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estate development is where you take raw
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land and you reimagine what can be
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constructed on that property fix and
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flip just like it sounds
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fix and flip and commercial real estate
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investing is the same as it is in
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residential where you buy a property
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make any necessary repairs and upgrades
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and then resell it wholesaling
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wholesaling real estate is where you
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find a good deal you put the property
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under contract and you sell that
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contract to another real estate investor
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or owner-occupant owner-occupied real
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estate similar to house hacking and
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residential owner-occupied commercial
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real estate investing is where you
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purchase a piece of real estate where
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you plan to run your business
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bur the brrrr strategy by rehab rent
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refinance and repeat and this is one of
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my favorite investing strategies and
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it's the one that I use time and time
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again step number two
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learn how to underwrite commercial real
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estate investments you need to know the
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math inside and out get your
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underwriting tools together you can
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either create these yourself or find
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some templates online most investors
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will use some sort of an Excel
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spreadsheet where they can type in
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various items
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so just purchase price estimated rehab
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projected rent and financing these
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spreadsheets will then crank out the
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expected returns for the investor on
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this deal you should also have a back of
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the napkin formula that you can apply to
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any commercial real estate investment to
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determine whether or not it's even worth
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underwriting now I do recommend when you
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first get started that you underwrite
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every deal you possibly can this way you
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can actually learn what makes a deal
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work this back of napkin formula could
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be anything from a single metric that
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works for you and can give you a quick
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green or red light for me I like to look
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at the asking price per square foot of
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the investments I make having a
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background as a commercial real estate
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broker I have in-depth knowledge of what
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market rents are per square foot by
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utilizing the prices per square foot on
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the purchase and the rent I can quickly
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determine if the deal will make me any
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money another option you have is to take
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a CCIM course and work for your
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designation CCIM which stands for
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certified commercial investment member
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is a designation offered by the CCIM
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institute this commercial real estate
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designation is comparable to a CPA for
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an accountant and is basically a master
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course on how to invest in commercial
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real estate they teach you how to
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analyze the project financials research
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real estate markets determine user
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criteria and make investment decisions
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so while this designation won't be
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important for every single one of you
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the CCIM course is pretty in-depth and
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you'll walk away knowing just about
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everything you need to know about
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investing in commercial real estate step
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number three build your a team when
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you're first getting started in
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commercial real estate it is crucial
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that you have a team of experts on your
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side that have a fiduciary
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responsibility to you building this team
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will ensure that nearly every aspect of
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a deal will be investigated and it never
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hurts to have another set of eyes
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reviewed your deals
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so the first member of your team is
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going to be a broke
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that specializes in your chosen asset
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type get on their mailing list and
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review every single email that they set
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underwrite and tour those properties
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that they put in front of you and have
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conversations with them about those
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projects ask them what they like about
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the site what do they feel were the
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drawbacks what do they feel as the
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anticipated capital expenditures that
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will be necessary to get that project up
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and running brokers want to bring you
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deals that will be successful so that
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they can continue selling you properties
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in the future after all if you have one
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successful commercial real estate
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project chances are good you're going to
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go buy another one
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next you're gonna want to hire a
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commercial real estate attorney hiring
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an attorney that specializes in
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commercial real estate is an absolute
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must in my mind not only do commercial
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real estate attorneys review and
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negotiate purchase and sale agreements
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on your behalf they also check to make
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sure that the property doesn't have any
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zoning restrictions when use issues
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environmental issues and they can also
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help you negotiate your loan agreements
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if the property needs any physical
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improvements you'll also want to work
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with a contractor that specializes in
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commercial real estate I'm sure by now
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you're starting to catch on with the
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commercial real estate specialty
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everything is different in commercial
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real estate than it is in residential
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real estate they're two very different
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industries so you wouldn't call a fire
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department a stop a bank robbery right
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so the same goes for contractors that
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specialize in commercial real estate
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your contractor will be able to walk
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through the properties with you and help
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you get an idea of what the expenses
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will be if the property needs any
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maintenance and repairs depending on
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your relationship with them you may only
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be able to walk through while you're
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under contract and not on every single
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deal you tour then you'll want to find a
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commercial property management company
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having an outstanding property manager
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on your side makes all the difference
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when you're investing in commercial real
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estate I highly recommend keeping a
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property management fee in your
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underwriting regardless of whether or
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not you intend to hire a property
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management company you never know what
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could happen and if the deal doesn't
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work with a property management fee it
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probably doesn't work at all property
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managers will be able to walk through
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and assist you during your due diligence
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just like a contractor would they can
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help along with your broker point out
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the pros and cons for tenants and any
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issues that may arise during dirac with
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the property finally you'll want to
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build relationships with commercial
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lenders commercial lenders have very
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specific underwriting criteria as well
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and can help you determine if a deal
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makes sense chances are good that if
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you're unable to get approved by
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multiple commercial lenders it's
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probably not a good deal tree lenders
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like they're your partner in the deal
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and be sure that you put together a
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solid presentation on the property step
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number four underwrite at least one deal
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every day practice practice practice the
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more you're looking at deals the better
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you'll be realizing what a good
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opportunity is underwriting a deal a day
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is a good habit to get into because it
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forces you to review the pros and cons
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of a property and why you would or
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wouldn't pursue that as an investment
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Michaelangelo didn't become an expert
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painter overnight he practiced just like
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you need to do with your underwriting so
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you can become an expert and reviewing
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commercial investment opportunities
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underwriting is probably one of the most
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important skills that you can have as an
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investor in fact underwriting properties
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is so important
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I know individuals that will charge
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between three and five thousand dollars
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to underwrite large or commercial real
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estate deals for you
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thirty five thousand dollars I mean if
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you're willing to pay that send me an
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email I'm happy underwrite your deals
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for you
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yes underwriting can be a bear I totally
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get it
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under running a project can be a very
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labor intensive process especially if
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you do it correctly but if the numbers
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don't work it doesn't matter how amazing
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you think the property is or where it's
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located it won't be a good investment
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you also need to set your investment
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criteria and stick to it having a set
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investment criteria that works for you
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is a very important part of underwriting
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commercial deals if you want to get an
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8% return your money
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don't settle for seven and a half
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percent every piece of commercial real
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estate that you buy takes away from the
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capital that you can invest into a deal
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that actually does fit your investment
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criteria step number five make at least
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one offer per week I got this one from
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my friend Brandon Turner over at
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BiggerPockets if you're not making an
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offer a week you're not looking at an
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underwriting enough properties
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commercial real estate investing is a
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numbers game and you may have to look at
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a hundred properties just to find the
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one that works however
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one property will be worth it it doesn't
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cost you a dime to put together a letter
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of intent and make an offer on the terms
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that work for you you never know what
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could happen that seller may be under a
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time crunch with his loan coming due or
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they may have another property that they
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want to purchase with the proceeds from
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this sale if you don't make the offer
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you'll never know so there you have it
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the five steps to buying your first
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commercial real estate investment for a
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deeper dive into the world of commercial
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real estate investing you can find many
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different resources on my website Tyler
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Campbell comm which will be in the show
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notes below if you enjoyed this video
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don't forget to like it share it and
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subscribe to my channel for more content
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on all things commercial real estate if
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you have any questions about investing
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in commercial real estate please leave
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me a comment below and I'll be sure to
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get back with you
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