Despite the recent interest rate hikes and slowdown in the housing market – or perhaps because of it – commercial real estate has been growing in 2022, and is expected to continue into 2023. Nearly 70% of major commercial real estate owners and investors polled by Deloitte said they expected the market to expand or at least stay the same in the coming months.
Investing in commercial real estate can prove to be lucrative, but how do you find the right property and investors to buy it?
There are many factors to consider. Knowing your client's needs can help you find something that suits their budget and needs.
Analyze Investor Needs
What each investor looks for depends on how long they plan to hold onto the property.
Short-term investors hold a property for around five years before selling it again. Returns may not be as high because commercial properties typically require longer ownership periods – 10 to 20 years – to see your investment pays off.
Companies are buying up properties where they plan to have offices or factories in the near future. Buying these buildings before the business moves in is known as pre-leasing, and it lowers the risk of investing because you already know how much rent a tenant will pay you every month.
Property portfolios offer commercial real estate investors some reassurance.
You collect several low-rise office buildings or houses that you rent out. These may not be big investments, but building up a healthy portfolio over time means that each investor has something to fall back on in case something goes wrong with one of their individual projects.
How To Become Successful in Commercial Real Estate Investing
The key to becoming a successful commercial real estate investor is to start small and grow your business along with the market.
An important factor in finding commercial real estate investors is getting out there and meeting new people. You should attend every possible seminar or convention that has something to do with investment or business. That's where most investors go.
You also need to be comfortable with social media, because many people advertise their properties now on Instagram and even TikTok. It's an easy, affordable way to get the word out about your commercial property.
These days, investors are looking for short-term returns and want them fast.
The longer a property sits without being sold, the more money it loses in value.
So how do you price your properties so that they sell fast? One thing that could help is putting together a package that includes everything an investor needs to know about the property, like historical data or legal agreements.
The real estate investing market may seem intimidating, but with the right information and tools at your disposal, you'll be on your way to putting together a strong investment portfolio.
How To Find Commercial Real Estate Investors
Not all investors are easy to find. Most of the best quality investors spend a lot of time researching and making connections before they start looking for properties.
Create a Professional Portfolio – Having a portfolio of storefront locations, parking garages or exclusive rental communities can help you reach your investment goals. Even if the investors you approach aren't interested in that specific property, a solid portfolio presentation is a way to open the door and cultivate a list of commercial real estate investors that grows over time.
Media – Look for local news websites that feature stories about people who have recently purchased investment properties in your area or region.
Trade Shows – There are many real estate investing trade shows that you can attend. The best part about the professionals who go to these conferences is that they are there to learn how to make more money, which means if you approach them at the right time and ask for a referral, they will be all too happy to give your contact information out to their network of friends.
Networking – You can also use networking events such as Chamber of Commerce meetings or alumni association events to meet commercial real estate investors in your area. The beauty of this kind of event is people often do not mind talking business over dinner or drinks after being introduced by mutual friends who can vouch for what a great agent you are.
Local Investor Clubs – You can even join local investor clubs to meet people specializing in commercial real estate investments. These groups are generally very active and always looking for how they can increase their network of investors who will ultimately use them as a sales force if they become involved in commercial real estate development projects.
Commercial real estate investments will always have their place in the market. Some people do not want to invest in residential properties, want to diversify how they make money and how much risk they take on, and see the tax benefits with investing in commercial properties.
These types of investments are generally going to be more profitable than stocks or traditional mutual funds over one year, two years, and three years or more time periods when looking at average annualized returns.
The key to finding commercial real estate investors depends on how confident you are in what you have to offer them. If you can't come up with a good pitch about how much money they will make when they invest, they won't be interested in listening to anything else you have to say about your properties.
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This article was produced and syndicated by Wealth of Geeks.