Commercial Real Estate investors equate the search for valuable investments with the search for gold. Browse information on the Internet, talk to brokers, well-meaning friends, other investors and motivated sellers to find real investment opportunities, wasting valuable time and money. It’s enough for you to give up prospecting before you start. . . until you use a preselection lead mechanism.
An investor cannot filter as many leads as a dedicated team with a common goal.
Investment knowledge shared by knowledgeable resources is the shortest distance between your investment goals and high-yield returns on your investment dollars. The idea that an investor who works harder than other investors will bring in more leads from their prospecting efforts is false. I believe that hard work is its own reward, but I prefer to work smart when it comes to lead generation.
Use your investment team to provide pre-screened leads and find the right deals faster.
Doing prior due diligence on pre-selected deals saves time, effort, and increases your ability to find investments that meet your investment criteria. Using money to make money produces higher profits than working for money, use your resources to pre-screen leads and increase your market share.
Your investment strategy must be clear with your TEAM.
Commercial real estate brokers, field partners, property managers, legal and financial team members, appraisers, and building inspectors are excellent primary resources and should know your specific criteria for purchasing an investment property, especially when researching a market for a potential investment. Your winning team is a reflection of your ability to gather the best resources in your network. Choose who you work with based on proven experience and their ability to deliver the leads you’re looking for. Your team is important and can help you make decisions about a market, but you are ultimately responsible for where and why you invest.
Explain the main criteria:
- I am looking for cap rates in the ____ range, comparable to market cap rates.
- I am willing to pay ____ price per unit
- I want the building to contain these physical characteristics: _________, ___________, ___________.
- Include your restrictions: I will No look at a property with a chiller cooling system in this market…
- Check acceptable leads and acknowledge your team resources.
Have an efficient and automated lead location process.
My team of real estate agents, field partners, and other professionals deliver pre-screened leads. They know what I will buy and they will benefit from a property I purchase. I don’t spend time looking for new offers. Shortlisted leads, let me do some quick assessments to decide if making an offer is warranted. I run the numbers to determine investment returns and determine my offer. It’s important to move fast and make an offer when the opportunity presents itself.
Statistical gold bread
Statistical analysis will also provide reliable data. Specific details about the cap rate, price per square foot, and price per unit are important considerations. Submarket and location analysis are equally important data. If you’re evaluating 100 properties when you’re looking to buy just one, your selection process needs improvement. Use the following statistical gold to target an investment market:
- Rental Rates-Historical Rates (based on a six-year history) will indicate a trend and help you predict future rents. (See: American Chamber of Commerce Research Association for Cost of Living Rent Factor for city-specific data.)
- Vacant– forecast changes based on fluctuations compared to six-year historical patterns. A substantial fluctuation indicates a buy or sell market. (Realtor can provide data or verify Department of Commerce, Census Bureau, Washington, DC)
- Building permits issued– consisting of five or more units for the construction of apartments. (Check city planning division for recent data, check local library for resource records.)
- household income– indicates the value of the apartment. As income increases, the ability of tenants to pay higher rents increases, which eventually affects property values as net operating income (NOI) increases. Look for EBI or income statistics for effective purchases.
- Employment– Look up employment data in County Business Patterns at your local library, or check the Chamber of Commerce resource statistics.
- Number of households– Determine a more exact number of tenants than population. (See: Local Library Sales and Marketing Management for EBI number.)
- median house prices– Available from the National Association of Realtors. If it is not available, look up local historical data at the Chamber of Commerce.
Statistical data tools reveal market potential when you learn what to interpret from the numbers.
Market data and shortlisted team leaders will provide valuable opportunities as you learn to experiment and practice in various markets under various market conditions.