Tips for Finding a Commercial Real Estate Mentor

As we’ve previously stated commercial real estate is a growing market that has shown a lot of profitability.  With that being said, it is not a market that one can jump into blindsightedly.  A lot of people entering the world of commercial real estate need a mentor.  Here are a few tips to take into consideration when looking for a mentor.  

One of the main things to think about is the geographic location you are searching for.  It’s important to note that properties in Florida are going to offer a higher ROI than properties in Iowa.  Keep these thoughts in your mind when you are considering an investment. 

Another important thing to know is that you need to know the market.  If you are looking for a mentor, their job is not to teach you from ground up.  It’s imperative that you have some pre-existing knowledge in order for the mentor to elaborate and expand what you already know. 

When you think that you have found a worthwhile mentor have a sit down face-to-face chat with them.  A lot can come from an in person conversation.  Although the internet is great for communicating, meetings are the best way to let your mentor know that you are serious about investing.  

If you have a meeting set up with your mentor be sure to have high value questions to ask.  Sitting down and asking them to ‘tell me everything’ isn’t going to get you very far.  Research goes a long way in this field, and it will ensure that you and your mentor have a quality conversation that is productive.  

Keep in mind that mentoring isn’t something everyone wants to do.  Some people have the mindset of ‘oh I figured it out myself, they can too.’  Try and avoid these types of people, and don’t get discouraged when you run into this personality.  Keep learning and researching your market, and eventually you will find someone who is willing to help. 

The Advantages of Commercial Real Estate

Investing in real estate is a great way to put your money to work in this economy.  With the many different types of investments that are available, it has been proven time and time again that commercial real estate has an enormous amount of benefits.

Often times, commercial real estate leasing contracts are longer than those of residential.  Residential real estate leases are usually short, whereas the commercial properties typically have lease agreements from 5-10 years in duration.  Assuming the tenant(s) do not vacate or go out of business, this long term provides for stability in the investor’s portfolio.  Advertising and marketing costs are much lower in commercial real estate properties as well due to the lower turnover rate.  People often switch apartments within 1-3 years, however, businesses do not move as frequently.

Another advantage of commercial real estate is there is typically less maintenance responsibilities for the property.  Triple net lease agreements provide for all maintenance of the property be the responsibility of the tenant.  In residential real estate, it is usually the investor’s responsibility to take care of the property and any associated maintenance and/or repair work.

Commercial real estate investing is a profitable endeavor if you have the time and patience to put into it.  On the other hand, it can also be a very risky business if you have not done the proper research or sought the advice and assistance of a commercial real estate professional.

Investing Decisions - Commercial vs. Residential?

Investing in residential and commercial properties has been proven to be quite prosperous for many people. 

But which types of real estate seem to be a wiser investment decision?

Let’s take a look at a few topics that are covered when thinking about investing.

One of the main strengths that commercial real estate properties have over residential is the quality of their leases.  Typically, residential tenants pay on a month to month basis.  This can be quite bothersome if someone is simply looking to invest and make some extra cash.  Alternatively, commercial real estate usually possesses leases that span over multiple years.  These are much lower maintenance, and typically more preferable to investors.

When it comes to repairs, it’s usually the lessee that has to pay for residential repairs.  A lessee can be expected to be woken up in the night to come fix a refrigerator, clogged toilet, air conditioner, etc.  Commercial real estate investors don’t have to deal with that headache.  Most times commercial real estate repairs fall under the leaser. 

Another strength that commercial contains is that they have the law enforcement on their side.  Well, more so than residential, that is.  When you own a residential property it is very difficult to evict tenants.  When it comes to commercial it is much easier for a landlord to evict an unruly tenant. 

Furthermore, commercial real estate will yield you less wear and tear.  If you are renting or leasing out your residential property chances are the person or family will be living there 24/7.  They will constantly be using the utilities and appliances.  With commercial, you typically don’t have that.  Most businesses utilize their property during normal working hours, and then lock it up and leave it alone for the night. 

On the grand spectrum of investing, commercial real estate investing always seems to take the cake.  They bring in more money, and require less upkeep.  Commercial real estate is a growing market. 

Commercial Real Estate Pricing Trends for 2012

There seems to be mixed results with the commercial real estate pricing trends this year.  It appears that the General Commercial sector is rising, while the Investment Grade is decreasing.  However, one fact is certain, and that is that we are continuing on with recovery in this field.  According to CoStar the steady increase of the General Commercial sector is the main clue that the recovery is continuing.

Here are a few important facts that were found in the April release by the CCRSI:

·   Due to a dip in Investment Grade pricing, the US Composite index showed a decline of 1.3% in February 2012.

·   The Investment Grade index showed a decline of 6.6% in February.

·   The three major commercial property types are office, retail, and industrial, and they have been positive in net absorption of both general commercial and investment grade.

Even though the Investment Grade index declined 6.6% in February 2012, that actually is a trend.  Typically the Investment Grade shows a decrease within the first 2 months of the year.  Although the trend may suggest otherwise, investment grade properties have increased 11.5% since 2009.  These investment grade properties seem to be doing better than the general commercial properties.  

Although it has remained relatively consistent, the General Commercial index has shown improvement over the Composite index.  CoStar states that a reason for this is partly because of the increase in demand for general commercial properties, and a diminishing higher end of the market to net absorption. The good news is that the increasing absorption of general commercial properties is not a sporadic event.  The results show this to be a steady increase that can be expected to hold.

Venezuelan Investors Find Interest In Southern Florida

It’s no secret that there has been a significant rise in Florida real estate.  We partly have foreign investors to thank for this rise.  Latin Americans have been taking it upon themselves to invest in a variety of Florida properties.  According to the Miami Association of Realtors,  it is Venezuelans who are leading the international investors, closely running with those from Argentina and Brazil. 

So, why is Venezuela investing in our market?

Well, part if it has to do with the amazing deals that can be found in Florida.  Many of the investors are coming over and paying cash for their investment.  These wealthy investors find what they perceive to be a “great deal”, and don’t hesitate in placing their money into some American real estate.  

Cleto Puzzi called it the “Chavez effect”, implying the Venezuelan president Hugo Chavez is to blame.  Puzzi states that “you cannot invest in Venezuala these days”.  Evidently the investment opportunities in Venezuela are scarce, and the wealthy must go north in order to make their money grow.

This international investment growth has helped out the Florida market immensely.  It enabled many real estate developers to develop more properties.  Florida is named the top real estate opportunity for foreign investors- southern Florida being specifically in the lead. 

Although many of the investments are currently residential; there is no limit to what could be done commercially.  Historically, an increase in residential sales often leads to an increase in commercial sales.   The rapid rise of the residential international investments could be a direct link to the rapid rise in commercial real estate investments.

This trend of investment will hopefully expand.  Although the majority is lead by Latin America, some are expecting for European investors to make their way to southern Florida.  As long as the deals are present, so will the international investors.