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How to Make it in Commercial Real Estate

Quite often, when people begin to invest in commercial real estate, they begin small. They may acquire a single family dwelling, a duplex or maybe even a small apartment building. In order to keep continue the commercial real estate investment game; you have to keep moving property. While buying and selling like kind property has the potential to bring you profitable gains and tax free exchanges under the IRS 1031 real property exchange tax laws, at some point you will want to expand. In fact, if you do not grow, you will eventually find that your bank can no longer help you either because you have maxed out your single family mortgages or your investment portfolio has extended beyond their lending parameters. Congratulations, you have just outgrown your residential lending company. It is now time to move on over to the commercial property side of your bank.

Strategies and Practices

Sun Tzu, author of “The Art of War,” said, By taking into account the unfavorable factors, he may avoid possible disasters.” When considering commercial investment, you must consider anything that could possibly go wrong. This simple proactive measure can save you considerable amounts of money in the long run. Ethical standards and sound business practices should be upheld not only to prevent legal action being brought against you and your company, but to increase your legitimacy in the industry and community. When you engage in adhering to ethical standards on all counts, you will be respected and you will be trusted. This reputation can prove invaluable when you decide to purchase more property, particularly in an area where you have already firmly established yourself as an ethical business person.

You should also have a “do what you say and say what you mean” mentality. In other words, don’t say things that you don’t mean and if you say something, mean it. Follow though on your promises and commitments. Establish yourself as reliable, dependable and trustworthy. While this is crucial in any business practice, it is exceptionally vital in the real estate investment business because a large part of your business, sales and acquisitions, relies on networking. Your standing in your industry and your business can go a long way in facilitating your investment practices – and your success.

Sales Strategies

Your sales strategies are crucial to the success of your investments. You should know your market inside and out, watch the rises and falls of values and take note of what drives a property’s value up and what can drag it down. You should also be extremely knowledgeable in the area in which you are investing. In other words, know the ins and outs of commercial real estate investing. If you invest in apartment buildings, know everything there is to know about the properties, how to improve them, maintain them and move them.

Additionally, you should take time to know the community where you are investing in the property. Is the property near a university? It is in an economically depressed area? Is it in an area that is experiencing growth? What is the forecast for property values over the next few years? Is the property located near something that could potentially drive down its value? Drive it up? Do your homework and know the area inside and out. This will also help you if you decide to invest in additional property in the same area. Win win situations are always a good deal, of course. If everyone can come out ahead, all the better.

Watch the market for various trends and stay on top of them. The real estate market is constantly changing so when you notice a trend, move fast. Finally, know how to market your deal. If you do not know what you are doing you will most likely make bad investment decisions and you are very likely to lose money. It all goes back to knowing your investment area and knowing what you are doing.

The Business Side of It

Managing the business side of it all is extremely important to making money. Not knowing what you are doing on the business end of the equation. Some areas of business management that you should pay close attention to are:

* Organization – Organization is vital to running your business in an efficient manner. You must be organized or you will lose valuable time and money because phone calls will not be returned, appointments will be arrived at late and credibility will be lost. The last thing that you want is to be labeled the “absent minded professor.”

* Time Management – If you can not manage your time you will likely be unable to manage anything else. Set aside a certain time or times during the day for various things such as email, returning calls, pursuing contacts and tending to the business portion of your company. Set a schedule and do not stray from it.

* Financing and Budget – Set a budget and stick to it. You need to maintain your budget and stay on top of your financing. This is one area where super organization is vital. This is what drives your business and if you lose money you business will suffer.

* Team Development – Create strong, effective teams and constantly work to develop them. This will be your support system when you are in the throes of an investment venture.

Making the Deal

This is the nuts and bolts of the commercial property investment process. Select your properties, seek out great deals and develop property that turns a buck. You should identify your investment strategy and seek out properties that fit specific criteria that you develop. You can find properties by appointing others to locate the properties for you, use local press and marketing principles to find hot spots and even employ the assistance of a broker. With some know how and a lot of work, you can be successful in commercial real estate investing.

Investing in commercial real property relies in a variety of factors in order for it to be a success. Ethical practices, sales strategies, sound business practices and knowing how to make the deal all work to create an investment sales and acquisition success story.


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