So you want to enter the world of commercial real estate but don’t know where to start. Perhaps you’ve heard of the numerous benefits of commercial real estate investing and want to experience them for yourself. Before joining this competitive market, you need to know a few things. This guide from the real estate professionals at Frontline aims to set you up for success in the commercial real estate world.
Become the Expert
There are many different pockets and focuses within commercial real estate. We always suggest beginners start by becoming an expert in one of five specific areas:
- Multifamily
- Office
- Industrial
- Retail
- Hospitality
To choose an area, assess your needs, goals, and risk tolerance. Before you begin to invest, educate yourself as much as you can. You can:
- Do research online
- Talk to other investors
- Read books
- Take classes
In short, you should do anything you can to learn about the ins and outs of the market.
Solidify Your Investment Strategies
Just like there are different types of properties you can choose to invest in, there are also different investment strategies. Some of these include:
- Land banking
- Development
- Fix and flip
- Wholesaling
Do research to discover which investment strategy is right for you.
Learn About Underwriting
You will also want to understand underwriting, which is how lenders determine if you as an investor are reliable enough to be a customer of theirs. You can even take a CCIM course, which stands for Certified Commercial Investment Member, for credentials and knowledge to appeal to lenders.
Work With the Right Team
Partnering with a passionate, knowledgeable, and experienced commercial real estate company in Chicago will make your introduction to commercial real estate much easier. Whatever you need, Frontline Real Estate Partners is ready to assist you. We offer:
- High-level advisory services
- Help purchasing property
- Help dealing with tenant or buyer issues
- Property management services
- Commercial real estate investment
How to Get Started in Commercial Real Estate
Now that we’ve covered the basics, let’s dive deeper into more advanced tips for commercial real estate beginners.
Network
Attend local real estate meetups, join online forums, and connect with experienced investors. Building relationships can lead to valuable mentorship and potential partnerships.
Start Small
Consider partnering on a deal or investing in a real estate investment trust (REIT) to get your feet wet before diving into direct property ownership.
Learn to Analyze Deals
Understand key metrics like cap rate, cash-on-cash return, and internal rate of return (IRR).
Stay Informed
Keep up with market trends, economic indicators, and local development plans that could impact commercial real estate values.
Location is Crucial
The adage “location, location, location” holds especially true in commercial real estate. Look for properties in areas with strong economic indicators and growth potential.
Assess Tenants
In commercial real estate, the quality of tenants can significantly impact your investment’s success. Look for properties with stable, long-term tenants when possible.
Financing Options
Familiarize yourself with different financing options for commercial properties, including traditional bank loans, SBA loans, and private money lenders.
Understand Lease Structures
Commercial leases are often more complex than residential leases. Learn about different types like triple net (NNN) leases, where tenants cover most property expenses.
Consider Property Management
Decide whether you’ll manage the property yourself or hire a professional management company. For beginners, professional management can be a valuable resource.
Plan for Vacancies
Commercial properties can take longer to lease than residential properties. Ensure you have enough cash reserves to cover expenses during potential vacancy periods.
Value-Add Opportunities
Look for properties where you can add value through renovations, better management, or repositioning in the market.
Exit Strategy
Always have an exit strategy in mind. Know your long-term plans for the property and be prepared to adjust as market conditions change.
Learn How to Invest in Commercial Real Estate from a Trusted Partner
Remember, commercial real estate investing is a journey. Commercial real estate can be a lucrative and rewarding investment path with the right approach and mindset. Start small, learn continuously, and seek advice from experienced professionals.
When you partner with a reputable real estate company, the company will represent you on selling, leasing, and acquiring commercial real estate properties. Contact Frontline Real Estate Partners today to learn more about commercial real estate investing for beginners or to invest in your first commercial property.