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Commercial Real Estate 101

Updated on May 04, 2011

Getting To The Basics

I’m in my home territory, Dallas, Texas with the Real Estate Profit Coach gang. We’re here for Jayme Kahla’s Commercial Inner Circle meeting with our students. We meet as a group twice monthly via teleconference to review commercial deals. Our plan is to spend a few days together twice a year working intensively on our deals. There are brand new investors, and very experienced investors in our inner circle. Regardless their level, all benefit from the advice and experience of everyone in the room. It’s really a great thing!

When I say our deals, I mean exactly this. We will be buying commercial property together as a group, and will share in the proceeds. Our buying criteria was as follows:

  • Multi-family or income producing propety
  • Greater metropolitan areas
  • Ability to deal with owner directly
  • Must meet cap rate expectations for area (defined per market)
  • Defined and credible exit strategy

Our goal for the three days was to find a deal. How would we accomplish this? Through leverage:

  • Posted Various Craigslist ads
  • Contacted to local hard money lenders through REI clubs in Texas
  • Contacted commercial brokers through ActiveRain
  • Contacted Property Managers through Google
  • Sent out MeetUp email blasts to multiple local area groups
  • Contacted commercial listing agents for any pocket listings
  • Reviewed MLS properties

You will be amazed how quickly you can reach hundreds of investors through these techniques, and our response is great! Contact me directly for the ad verbiage used.

We need to evaluate the deals to determine which ones were credible and deserved further due diligence. Since most of the deals were apartments, we created a spreadsheet to log the important factors to allow for a quick review. The factors we include in the spreadsheet are:

  • Gross potential income
  • Vacancy
  • Gross operating income
  • Total operating expenses
  • Net operating income
  • Cap rate

These factors allowed us to level the playing field and look at a property solely based on its financial merits. No emotions involved. The point person, or the individual that brought the deal, could give us orally the highlights, and allows the group to review up to 20 properties very quickly. If a deal looked marginal from the first blush analysis, the point person could elaborate the properties points, i.e. favorable financing, etc.

All this work generates a group decision of moving forward immediately on some properties, and further due diligence needed on others. We delegate tasks and by the end of our time together we submit a Letter of Intent on many of the properties.

Now, these are pretty good results for a couple days work, right? It’s amazing what a little hard work and focus will do. Question is, why aren’t you doing this in your market?

CIC Members


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    • 1scottcarson profile image

      1scottcarson 7 years ago from Austin, Texas

      I really like this one! Gotta Love Jason making a scene! LOL!

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