How to find great commercial investment deals
We’ve discussed how to finance commercial investment deals and we’ve also discussed what to do when you come across a great deal but many have asked us how do we find them?! Well, in this post I’ll describe the process I’ve been using so far.
Tip # 1 – Search for unrestricted land on residential listing sites like HAR
My favorite commercial real estate investment is commercial land. It has so many possibilities and thus it has many different value scenarios. So why am I looking for unrestricted commercial land on HAR? The main reason is their lack of knowledge on how to value land that could be used for commercial purposes.
Residential realtors focus mainly on selling homes. They don’t sell a lot of land and rarely sell land intended for commercial purposes. So, when they come across unrestricted land they often struggle to value it correctly.
Also, there are thousands and thousands of residential realtors and new ones getting minted every day of the week. So, it’s very likely that at some point in time you’ll get a newly licensed residential agent listing some unrestricted land that could even be located on a nice FM road. If the let’s say 10 Acres of unrestricted land had a house on it they probably managed to value the house at a reasonable price but when it came to the additional 9 Acres they completely undervalued that part of the property.
Sometimes a seller of some good unrestricted land is desperate to sell for any price just to get some cash, maybe they have to move, maybe they owe money, maybe it’s a divorce situation, who knows. When they get in touch with their friend who just obtained their real estate license and they put that property on the market and it comes with additional 5 to 10 acres of land, it could be your day!
Tip # 2 – Search every day!
When an incredible deal comes along you’ll usually get a call from your realtor first thing that morning telling you that he’s found a deal for you where you can make $50,000 to $100,000 (or more) literally the day you buy i.e. you are buying something for way less than it’s worth. Now, if that’s what happens with you and your realtor then you need to give him or her a call right now and invite them out to lunch or buy them a ticket to a show or something.
Basically, THAT’S NOT GOING TO HAPPEN!
Realtors are busy people. I know many people think realtors have a cushy job sitting around waiting for the phone to ring and then let’s just write up the contract. It’s of course not that easy and a lot of a realtor’s activity and efforts are never rewarded – for instance when a property does not sell or a deal falls through or a seller decides to take their property off the market or they just decide to list with someone else. A busy realtor also typically works with 100’s of prospects. They are not going to be able to provide the same high level of service to every single person for every person’s custom requirements.
The best they can do is if they know of a great deal they’ll send it out to their database and see who’s interested. But, now you’re up against 100’s if not 1,000’s of other interested parties.
Or, they are able to provide a high level of personalized service to a very short list of very good clients. That list, by the nature of the work, is usually a short one. Maybe five to ten people.
So unless you have a very special relationship with a realtor, you should probably take matters into your own hands and search for great deals yourself every day.
Why every day? Why not once a week? Well, the great deal is not going to wait for you to get ready before it comes to market. It’s going to get listed whether you are ready or not. No special announcements, no email warning, no bells, nothing. So it could listed on Tuesday and be under contract by Wednesday or Thursday. So if you’re going to wait for the weekend, well, you missed the date it was listed and the day it went under contract.
So, the only way to be one of the first people to see the great deal is to look every day for deals. That’s the way you find the great deals. Of course, if it’s a great deal and you estimate that it’s selling for way less than it should, you need to act fast as otherwise someone else will figure out the same value discrepancy you just did and they’ll want to lock it in as well.
Tip # 3 Use Technology
A real good way locally (i.e. in Houston) to get the “great deal” is to set up a search on a website with the parameters for the type of property you’re looking for. Many realtor websites offer this as nowadays most of them offer all the listings from HAR and you can set up and save your own search parameters on their website. The website will then email you every morning (typically) and you can quickly review the new listings of the day to see if any of them are interesting.
I’ve set up a search on some realtor’s website (we don’t actually have something like this!) for unrestricted listings with no less than 3 Acres if I recall correctly. That way I don’t get swamped with tons of residential subdivision homes that I’m not interested in. I usually see 3 to 5 properties a day which takes me just a few minutes to scan to see if there’s something interesting.
I’ve purchased two incredible deals using just this exact strategy i.e. superb commercial properties listed on HAR. The gap between finding them was about nine months. So, as I said, you have to have patience and you have to just keep scanning. At some point something’s going to show up. It’s a numbers game. You just have to keep checking.
Tip # 4 Other sites you can also check
Loopnet – Of course you can also check Loopnet. Use their filter mechanism to show only those properties listed in the last 24 hours. Or, if you’ve skipped a few days you can do “within the last 3 days” or “within the last week”. I found an incredible deal on Loopnet just like this about six months ago and we now have a contract on the property for more than twice what we paid for it! That is VERY unusual as most of the guys listing on Loopnet are commercial real estate brokers that know their values very well but this particular lister was NOT a commercial broker but instead was acting as a “wholesaler” i.e. not a licensed realtor. I found his listing the day he listed it and I had it under contract within hours of seeing it online. So, I didn’t even bother going to see the property before I had the contract signed. Then I drove out to see what we had although I already had a pretty good idea from Google Maps & Google Earth maps.
Craigslist – Properties get listed on Craigslist as well. Many of the listers on Craigslist are individuals listing their own properties. I have not managed to buy something from a Craigslist seller yet but I’ve seen some interesting deals on there! I’m sure if I keep looking I’ll come across something one day.
Facebook – Their “Marketplace” area is a place where a LOT of people are selling stuff. In my opinion items sell about 10 times faster on Facebook Marketplace than it does on Craigslist. I recently put a movable home on both Facebook & Craigslist and I must have had about 30 or 40 prospects from Facebook compared to about 2 or 3 from Craigslist. The only hassle with the Facebook Marketplace is that there is no filter mechanism to show the most recent listings. So, you have to keep wading through a bunch of stuff you’ve already looked at. So… that puts me off. I have already found some interesting properties on it though and you can “save” them and keep tabs on them. Haven’t put offers in on any of them though as they were not in the right area for me.
Tip # 5 Call your agent!
If you’ve found a “great deal” i.e. one that you believe is being sold for significantly less than true market value, you obviously need to move pretty quick to lock it in. So, get your realtor to either write up an LOI (Letter of Intent) or maybe go straight to contract so that if the seller agrees they can simply sign the contract right away.
Obviously the better you know your realtor, the quicker and easier this will be as you’ll be on the same wavelength.
This was NOT a short post… sorry!
But, I hope you’ve found some ideas here that you could possibly employ to find your next great commercial investment deal!
Remember, It Pays to work with a Professional!