Commercial Real Estate Investing For Dummies - Peter Harris

Скачать книгу

in an area that has had decreasing cap rates for the past few years

      For the long-term investor, here are some bad deals:

       Overpaying in an area where cap rates are increasing

       Buying in an area where the economy has been sustained by one large employer

       An office building that’s functionally obsolete today with new building projects underway nearby

      Short-term investors

      Short-term investors hold their investments two years or less. Their goal is to buy, fix up, stabilize, and sell.

       Buying at a really low price by using ultraconservative resale figures

       Acquiring an “easy-fix” rehab property with little down payment and owner financing in a seller’s market

      For the short-term investor, these are some bad deals:

       Buying a rehab in a market that starts to decline right after your purchase

       Not doing a thorough enough analysis and due diligence and finding out that your rehab budget is actually off by double the amount

       Assuming a loan with a large prepay (early payoff) penalty over the next few years

      Getting Started Making Deals

      Wholesaling a great way to get started

      How to find deals that make sense

      Making offers that get accepted

      Strolling through due diligence

      Getting Started by Wholesaling

      IN THIS CHAPTER

      

Finding new ways to deal with too many deals

      

Wholesaling apartment buildings

      

Following the 5 Steps to Wholesaling

      

Closing a wholesale deal

      

Getting your resources ready

      If you like the idea of owning commercial properties and are looking for an easy way to get started with commercial real estate, then you may want to consider wholesaling.

      Wholesaling is the process of finding a commercial property, getting it under contract at a great price, and then selling your position in the deal for a “wholesaling fee” where your buyer’s total price adds up to be a very good deal. This is a great way to get started because you’ll be sharpening the essential skills of finding and analyzing properties without having to actually purchase or manage anything.

      In this chapter you’ll discover how to get your foot in the door with commercial real estate by wholesaling properties. To wholesale commercial properties, you’re going to need to know how and where to find the right types of leads. We’ve got you covered. You’ll get to see how to analyze properties to see if the numbers make sense for a potential wholesale deal. One of the essential keys to wholesaling commercial real estate is getting the property under contract. We’ll explain why this is so important along with share some tips about contracts and agreements from the trenches. What comes next is getting clear on how to find the right buyer, followed by the essential steps to closing and getting paid for wholesaling a commercial property. Let’s get started with a story about you, in, let’s say, five or ten years from now.

      To get a handle on wholesaling, imagine that you’re the vice president in charge of acquisitions for a large commercial real estate investment fund. Your job is to sort through the hundreds of deals that your team of deal finders feed you each week from across the country. Your deal finders are experienced pros who know how to find motivated sellers, connect with them directly, and get signed purchase contracts at below market prices or with creative financing terms.

      What you’re going to do is to sort through the signed contracts you’ve been sent to separate out any deals that don’t fit your ideal requirements. Your fund has grown to where it only makes sense to do larger properties, so you put any signed contracts with less than 50 units into a folder on your computer labeled “Wholesale Deals.”

      Another quick sort through the remaining properties based on your current acquisition guidelines allows you to eliminate a few more properties that have greater than 20-percent vacancy, are located in a metropolitan area with less than 200,000 in population, or properties built before 1978 when lead-based paint was still in use.

      These properties are added to the others in the Wholesale Deals folder. Similar to a worker at the fruit packing plant, you’re sorting through the deals coming in to pull the ripest, juiciest, fruit off the conveyor belt because your fund “cherry picks” the best deals to ensure strong returns to its investors.

      Using your experience along with some software and automation, you’re then able to perform initial underwriting for each deal using industry averages and market rents from each area to provide you with the projected cash on cash return. The strongest deals, those with the least risk and the highest returns, stay on your desk. Everything else goes into the Wholesale Deals folder.

      This goes on throughout the week until Friday, when you open up the Wholesale Deals folder to take a look at everything in there. These are the deals that didn’t make the cut for your big investment fund, but you know there’s still some value here. Your job is to take these deals, which may be highly desirable to smaller investment companies or individual investors, and wholesale them off.

      You run these wholesale deals through another analysis, which eliminates any properties that are too risky or have low returns that would make them unattractive to an investor or buyer. Because these don’t make sense for any buyer to move ahead, the contracts on these will be cancelled (which is allowed during the due diligence period).

      The very best of these are initially emailed out to your VIP buyers list, people whom you know and have done business with previously. After three or four days, your buyers have scooped up most of these. Anything that’s left is added to the properties in the other subfolder, which you then market as wholesale opportunities to the public.

Скачать книгу