5 Steps to Buy Your First Commercial Property

five steps to buy your first commercial property in this video I'm going to take you from where you are now into buying and owning your first commercial property but my question is where are you now where are you today can you relate to this is this you you always wanted to buy commercial property but you're not sure where to begin how to begin this video is for you so check it out number two maybe this is you you can see commercial as a way to build your life financially over time or can you relate to number three you see your job is not the way for or two Financial Independence or number four you want to leave a legacy of wealth to your family to your loved ones or how about number five is isue you need to make up financially because of losses or lost time or you're just getting older and you need something to set up your retirement or how about number six right you eventually see yourself as being a full-time commercial real estate investor if you can relate to any of this here are the five steps to buy your first commercial property let's get started let's get started right here with step number one but before I get started if you have any questions during this video go ahead and and text Peter to 833 942 4516 and we'll get right back to you okay any question you like about how to get started any question on the number of steps I have here any question whatsoever just send it in we'd love to hear from you all right let's get started with step number one which is determine your property type and area that is Step number one when wanting to buy your first commercial property and I'll make it easy for you I am going to choose for you from my 20 years of experience the property type that you should focus on initially okay all right and there are these three these are the top three that I would like you to consider multifam self storage and mobile home parks and why is that because there is positive Demand versus Supply so in these three asset types especially multif family mobile home parks the supply isn't going going uh up faster as the demand all right so we are you are they're not building any more brand new mobile home parks we can't build enough multifamilies to satisfy the needs in our country we're between 4 and 7 million uh housing units short in this country and and it's getting larger okay all right and next is these three in my opinion from our experiences they have the best cash flow so if you're looking to develop a consistent cash flow build wealth over time these three are the best way to go and let's face it multifam storage and uh mobile home parks are the easiest to understand they really are and we have plenty of training on our YouTube channel concerning these three acid types so check them out all right and lastly plentiful okay there's lots of multifam Self Storage mobile home parks to choose from as opposed to uh uh shopping centers or or Office Buildings which we don't recommend at this moment okay so those are the top three how about the area here's what I want you to do for your first property this is the beginner okay I want you to start local within a 2hour drive from your home here's the reason why okay it's less risky because you can actually go there and hug the property and and check it out for yourself if the proper manager is doing something or attendance are misbehaving you can go there that day or on the weekend and see what's happening that is so important okay you're also because if you're local you're familiar with the demographics okay if you go out of state in some unknown Town you're not sure who's there what's the what's the tenant type what's the tenant profile you don't know because you're not famili familiar with it you don't know the area what's happening crime and so forth okay so you're familiar with demographics and uh also you need to be able to to visit regularly okay you really do when you buy a commercial property some of you know proper nine out of 10 proper managers are not any good that's a company stat and I'm sure many other investors would agree with that so you need to be able to hold your property manager accountable how do you do that you have to visit there is no shortcut around it all right also another reason why I want you to start uh local because it is not advisable okay for the for a beginner to buy their first commercial property out of state it is not okay if you're a beginner I wouldn't do it I would start local okay unless unless you have our help okay um for myself and our other coaches and a lot of our students their first deal was bought out of out of state but they had a lot of Cel from us a lot of training from us of how to hold a proper manager uh accountable for for the money part for the management part for the maintenance part and for the marketing part okay those four M are so critical the average person has no clue of how to hold a uh remote proper manager accountable and they end up having a disastrous deal so there's lots of experience and things you have to do there to hold everything accountable so that's why uh you can go out of state but you need our help but my recommendation is to start local okay all right so that's step number one of a property type and where to go let's go to step number two here we are with step number two step number two is to search and evaluate okay you need to know how and where to search for your commercial property and then secondly once you find one how to evaluate it okay very important let me go over this with you all right so uh when you search for your property there are basically two ways for you as a beginner the first way is to search for properties that are on Market okay you can go to websites such as loopet okay you can go to a website called kxy or you can just contact Brokers those are deals that are already on the market okay they're easy to find all right and but guess what these are going to be the highest price deals and because they're they're being sold by uh real estate agent and real estate agent his job is to maximize the price not to give you the lowest price so when he does that it kind of kills the cash flow and it kills the upside okay but it's a it's a good it's a good start it's a good way to learn to get started in the business by going to these websites okay so good to learn from the other key thing is when you look search for markets search for properties on Market is you're going to be able to establish relationships with agents with Brokers and things like that that and you always hear me say this that commercial real estate okay all different types it is a relationship based business okay so the more relationships you nurture the the uh the better you're going to be okay this it's hands down a relationship based business you need to honor those relationships okay all right now the second way to search for a deal is to search off Market okay these are deals that are not found on any of these websites so you can do that by going direct to the sellers and this is what we do at commercial property advisors I believe we are the best at it okay this is what we do that's our Niche okay and as a result this is by far by going direct to the property owner this is where the best deals are you can look on the screen here these are all three videos of students that found their properties off market and these deals were good enough for for them to be on the you our YouTube channel okay and because they're off Market uh there's there's room to negotiate and a lot of times the sellers really don't know what their properties Worth or could be sold for so you're getting the highest potential in terms of being able to raise your rents and raise the value by going direct okay and lastly you get unlimited creativity when you go direct to the seller because there's no middleman there's no agent in the middle blocking you so when you're talking and conversing directly with the seller when you have a motivated seller and you have a motivated buyer beautiful things can happen we done a ton of those creative deals in our company uh with our students okay all right um so that was search let's go to evaluate and I'm I I know a lot of you are are maybe intimidated by evaluating commercial real estate I'm going to make it really easy for you okay you when you evaluate you need to learn the basics the basics are learning how to calculate cash flow learning how to calculate the cash on cash return or the ROI and learning how to calculate the cap rate those are the key metrics in terms of deciding if your deal is a good deal or bad deal okay and I have this five minute video for you is called three simple steps to evaluating multifamily in five minutes okay I do I break down an entire deal for you in 5 minutes and show you how to do the evaluation you can't go wrong with that video you implement that in the video by the deals that you're finding here you're going to know if this deal is something you should go for or a pass on okay all right and um for some of you that really want to that you can see yourself doing this business and you want to take a a deeper dive into commercial real estate evaluation um I have a a book commercial real estate for beginners the link will appear right on the screen it's free you can download it and read go specifically to the valuation part where I break down deals for you and you can see all the number you can see all the calculations everything is there so go for it and check it out all right so that was step number two learning how to search and evaluate let's go to step number three here we are with step number three step number three is the exciting part well all the steps are exciting but this is my favorite part is this is when you get to make the offer so you got over the hump you you you're now Brave and you're ready to jump in with an offer okay let's go over that okay step three make the offer when making an offer on your first commercial property you're going to use two forms one of two forms you can use what we call a letter of intent all right a letter of intent is just a single P piece of paper where you put uh your name and your offer on a piece of paper it is not a contract is not legally binding you're just putting in front of the owner how you think you want to buy it okay so it's just a meeting of the minds to put the basic terms on the table and is really not a a legal offer it's just a way to get your your buying terms on the on the um table with the seller right and then once you the seller and you go okay I like those terms and then you can go into a formal contract okay so letter of intent is could be the first way but my favorite way because I don't want to mess around once I have a good deal is to go straight into a contract okay this is legally binding okay you want to go to a contract so uh the letter of intent is if you're not sure about the deal if you just want to feel the seller out use a letter of intent but if you like the deal and you don't want to escape out of your hands and you you want to buy it you go straight into a contract got it okay all right now when you make the offer you have to be very very strategic this is very important because you're about to enter into a legal agreement okay and uh here are the five most important parts of a commercial contract when you make the offer now if you are missing one of these pieces if you if you're working with an agent or using your own contract and you're missing one one of these five pieces uh you're in trouble or potentially in trouble okay so do not make an offer right on any commercial property unless you have these five things in your contract let me quickly tell you what they are and how to protect you with them okay versus price of course you have your small deposit they call their earnest money deposit you have your inspection period how longs take you to inspect your property then you have your Finance okay you have a how you going to finance it is it all cash are you going to go to bank and then you have the close date so these are the five things you need to have in a contract if you're missing any of these you have an incomplete offer okay so don't let anyone tell you otherwise hear me all right okay now probably uh you know the most important thing about this step number three are the four contingencies that go into your offer contingencies are defined as this is I will make the offer and go through it contenent upon this happening or I will make the offer and you let me do this first and in order for me to feel satisfied so I can move forward okay that's what the contingency so this offers contingent upon something happening or something you doing okay here are the four contingencies I want you to have in your contract and um if you are without them you are at risk okay all right so if you're working with an agent and one of these are missing or you're working with someone else one of those missing go ahead and add it okay all right first of all you need to have an inspection contingency basically you need to give yourself 30 days okay 30 business days in fact that's what we do in our company here 30 business days to inspect the property check out everything check out the uh do your inspection walk through every single piece of the property to look at the financials to do your research on a competition all of that stuff you get 30 days to get a roofer up there plumber electrici 30 days to check out everything okay all right and then you need to give yourself a finance con incy basically giving yourself again 30 days to to find the best loan from your property and as you know today the interest rates are a bit higher so uh it's tougher to get a property qualified because of the high interest rate so you need more time so the a good loan is out there you just need time and you need 30 business days all right so if a agent or a seller says I'll only give you 7 days it's not you're not going to be able to find the loan and seven days just not going to happen right same thing with your inspection contingency they want to give you seven days and is not going to happen you can't inspect a commercial property in seven days it's impossible okay all right um next is you need a title contingency okay the title of a property has uh who uh whoever the owner is and also if there's any leans on the property so let's say the current owner got into a fight with the plumber and the plumber sued them and there a lawsuit on the property you need to make sure you give yourself time to search the title and you get the title free and clear so you can purchase it okay and then the fourth contingency is often missing and I don't know why it's missing but in our company is not missing but in in majority of uh broker contracts or other contracts the appraisal contingency is missing you need to add a an appraisal contingency basically that says if you have have your property under contract for a million dollars the appraisal concy said it must apprais for a million dollars or more in order for me me to move forward and if it comes in under a million dollars you have the ability to back off all right same thing with your inspection finance and title it gives you the ability to say if you find something you don't like uh on the property hold in a roof or some issues you can back out and get your earnest money back or you can't get a loan and you you get your earnest money back or you find a lawsuit on the title and it scares you you can get out okay same same thing with the appraisal so make sure you add that to the contract all right I have a video here the link will appear on your screen it's called how to make an offer on commercial property okay where I break it down in like 20 minutes okay it's a long video but it's very very thoral and if you use this video you're going to be making uh some pretty good offers my last a note to you and many of you are offering wondering and you have so much trep addition when making offers especially multiple offers on multiple properties is um just because you have a property under contract it doesn't mean you're going to buy it okay it doesn't mean it all right so uh basically what happens you get a property on the contract day one you're jumping into inspection right and you're going to find some things on the property that you don't like let's say you say Mr seller I want you to f fix the sidewalk or I want you to replace this air conditioner and it's very expensive and the seller says no I'm doing nothing that happens a lot so that means you either have to pay it for yourself or you cancel the deal again that happens a lot so um just because you have a property owner contract there's High likelihood that you're not going to buy it because of your thorough due diligence okay which is actually one of the steps we're going to talk about all right okay that is Step number three let's go to another fun step and really really critical is step four let's do that next here we are with step number four which is due diligence here's due diligence in the nutshell if you were to go out and buy a used car you're going to open up the hood you're going to check the engine out you're going to start the engine you're going to rev the engine you're going to listen for any any noises in the engine then you're going to drive around the parking lot or drive on a freeway and make sure it's sturdy you're going to check the tire you're going to check the transmission you're going to check all the electric components on the car uh you're going to have specialist come out and just check the car make sure there's nothing wrong with it the same thing applies when you buy a commercial property you have to open up the hood you have to check everything out okay so due diligence is basically doing your homework on the property and why is this so critical is because there's a Latin term called caveat m means buyer beware let me explain when you purchase a home okay a residential property uh within with an agent you're going to get a a packet of papers of disclosures uh what's been fixed on a property what existing problems exist on the property what's been done uh anything that impedes the title uh so anything wrong or right about the property uh any additional features that you may not be aware of there'll be a long l list of forms that you're going to get from the seller these are called Legal property disclosures so they have to give it to you okay in commercial real estate we have no such thing okay so it is buyer beware it is caveat mtor so basically the seller of the commercial property could totally lie to you about what's wrong with the property and you end up buying it and finding out later there's nothing you can do so that's why this we have a the step four is dedicated to that because it is so important and as a mentor my responsibility is to tell you this okay so this is a big boy business and you need to have big boy knowledge on checking everything out okay so so it's critical because the caveat mour the three parts of your due diligence and and our student base when they get a property owner contract we have an extensive list okay of duil items for them to check out and report back to us to see uh if this deal is worth going after or not so after this 30-day period are going through this long list we know all the issues on the property I call them elephants under the carpet okay when need to know everything all right so the three parts are uh physical financial and legal so we have checklists for all three so we have physical financial and legal the three parts and it takes time okay remember caveat tour give yourself a minimum of 30 business days okay when you purchase a house they give you what seven days to inspect your your your residential property when you buy a commercial property it's going to be and it needs to be 30 business days you need a whole month and more to look at everything to do it well understood okay and another a video here is called six tips uh on due diligence for commercial uh real estate the link will appear go ahead and watch it it's a long video of me breaking everything down these three parts physical Financial Leal breaking everything down you watch that video and you're going to do a very very good job on due diligence on your first commercial deal all right okay that was step number four let's go to the last step which is Step number five here we are with step number five step number five is Monumental it is to fund and close your deal deal this is the big day all right now when you fund your deal there are three main ways you're going to fund your deal okay getting your deal Finance number one is if you have the downum payment yourself you're going to go to a bank a local bank and get a loan from A bank funding method number two is creative or seller financing this is my favorite part okay let me give you a situation that when you go direct to Property Owners just like we do here's what you're going to run into okay a handful of this sellers that you go to direct their property or themselves would not be bankable here's what I mean they may they may have zero Financial documentation on your property making it impossible for you to get a loan or they may have lots of vacancy on your property again you can't get a loan right or they may have a lot of repairs needed on their property and you can't get a loan so if you facing any one of those three you're you it's going to be really difficult to get a loan in your property so what you're going to have to do is do something creative especially if the seller is motivated the numbers look great you like the area and you think it's a really really good deal but you have those three obstacles and you can't get a you can't go get a commissional loan you're going to have to resort to something creative or or do do a a form of seller financing we and this is our specialty that's my favorite part and my favorite way to teach students how to do deals just like that all right so if you go to our YouTube channel you start looking at the titles you you'll see seller financing Master lease agreement no money down things like that so go forward and check out our our Channel you can see all the stuff that we do to help our students okay and then the third way to fund your deal is through syndication syndication means the pulling of money together for your deal uh with investors okay so you're going to get an investors i a link right here uh because this is such a legal uh topic and I have a great video that breaks down very simply for you how to do it all right so if you um have maybe uh under creative financing let's say that you you don't have your down payment you could do something creative or you could Syndicate the deal all right and you can use investor money to fund your deal okay we do all three in our company so that's funding now here's a little bit on the closing when you get to the closing day you won't be able to sleep the night before guarantee it because you're so excited and this is your best is yet to come once you closing your deal and that's when the the real work begins and we meet with all of our students on a monthly basis once they close the deal we don't let them go off to the sunset we are responsible mentors and we show them how to maximize the performance of the property okay you have to do that all right next actually the uh closing the closing day is actually the easiest part of the entire process of buying your first property okay so if you get here and when you get here it's it's huge all right and lastly our company we have a deal closing hotline for our students so when a student has any issues sitting at the closing table the day before they have an issue title pops up seller misbehaves we are right there for them and they can speak to one of us to get your deal to closing all right okay so there you go those are the five steps step number one is determine the property type in area step number two is to search and evaluate step three make the offer step four due diligence and step five right here fund and close you have any questions or you need help on any of these steps go ahead and text Peter to 833 94 to 4516 and we'll help you out send us any questions you have and we'll we'll be right there and get back to you so if you like this video go ahead and click the like button it encourages up to put more content out there if you want to receive more videos like this on continual basis I try to do this every week just for you go ahead and subscribe to our Channel and we'll send it right over to you if you like to see how our students use these five steps to buy their commercial deal you you can be mentored by us so the link will appear right on the screen go ahead and apply and then check us out all right everyone thank you so much and hope you have a great day and we'll see you at the next video

Channel: Commercial Property Advisors

Views: 6,799

Keywords: commercial property, how to buy commercial property, buy your first commercial property, buy your first rental property, commercial real estate, commercial real estate investing, buying commercial real estate, real estate investing, real estate, real estate investing for beginners, investing in real estate, buy commercial property, buying your first commercial property, commercial real estate investing for beginners, Commercial Property Advisors, Peter Harris Real Estate

Id: yvTuR4JWJkA

Length: 27min 13sec (1633 seconds)

Published: Tue Apr 30 2024