Finding Commercial Investment Properties

[Ian Bollinger]

I currently own several long term rentals and the goal is to branch into commercial real estate in the next 1-3 years and I'm looking for recommendations on finding good properties with the potential to cash flow. I've used Loopnet in the past but I've found many listings are way outdated. I'm located in MD but open to something out of state as well if it's the right deal. 

It is my understanding commercial real estate hasn't been booming the past few years like residential has and this next year might be a good opportunity to find something at the right price. Hoping for some inputs and advice from those who have made the transition from residential to commercial. 

Thank you!

[Steven McPherson]

The best advice is to hire a commercial real estate broker. Loopnet is limited and a broker has access to other marketplaces and networks that aren't available to the public.  Most of all, a good one can help you formulate an investment strategy and advise you on the market.

I am a commercial agent in Fort Worth, TX, but if you need help I can refer you to someone in your market who will be able to help.  Just let me know.  Thanks!

[Mark H. Porter]

Ian - I've done the same thing over the last couple of years using 1031 exchanges. I sold my properties up North and now own multi-tenant retail (e.g. Starbucks, planet fitness, restaurants, etc..) strip malls in SC, NC, and VA. I'm now retired in SC and use a commercial broker in the Greenville/Spartenburg area that worked with me on all these deals.

Message me if you want his info or my contact for the 1031 exchanges.

[Don Konipol]

Quote from @Ian Bollinger:

I currently own several long term rentals and the goal is to branch into commercial real estate in the next 1-3 years and I'm looking for recommendations on finding good properties with the potential to cash flow. I've used Loopnet in the past but I've found many listings are way outdated. I'm located in MD but open to something out of state as well if it's the right deal. 

It is my understanding commercial real estate hasn't been booming the past few years like residential has and this next year might be a good opportunity to find something at the right price. Hoping for some inputs and advice from those who have made the transition from residential to commercial. 

Thank you!

In my experience there’s ALMOST no instance where a broker brings a buyer a deal that’s all wrapped up and identified as a great deal.  To make a deal acceptable you have to make an offer usually well below the asking price.  99% of asking prices range from the high end of “reasonable” to fantasy land.  And the very few offered at or below “market” value are not easily recognized as such because on these comps are either not easily obtained or there are no good comps.  

Here’s a BIG difference between residential and commercial real property.  80% of residential SFR property that would be purchased for rental/investment is located in “cookie cutter” subdivisions, where homes in the development share common characteristics.  Makes it fairly easy for anyone to calculate probable market value fairly easily.  Not so with commercial property.  To purchase commercial property successfully the investor either needs lots of education/experience or must employ someone who has it. 

[Ronald Rohde]

First, there is no single asset that can be defined as "commercial real estate" what you see posted about office in Houston is very different from office in Los Angeles.

What asset class are you interested in? Anything can cash flow...

[Tim Ryan]

Ian, I think this is a good idea.  I transitioned from owning apartments to commercial in 2018 when apartments became too competitive with new 'syndicators" going crazy with interest only, and low down payment deals (now many are losing those properties).  I found an area that I believed in and bought 18 buildings in a downtown. Mostly Mixed-Use which is a retail on first floor with apartments above. I also bought 3 office buildings. One was 30% occupied in 2019 and during Covid we leased up to 96% and are at that now today. The others very similar.  There are these deals and they can make a lot of sense. The key is to enter a market early, when no one else is there. Could be risky is it never grows. But if you know it will, you can make a killing. DM me and I can give more specifics.

[Henry Clark]

7720 Belair RD in Baltimore.   Under contract.  
Use this as an example of properties that could be developed.  We do self storage and flex buildings.  Risk is higher but you will make more money developing a site versus buying.  Obviously needs vetting.  But this location would be $1.5mm equity day one if self storage.  

If you’re an investor you have to chase what everyone else is doing.  If you develop you create your equity.  More work and risk.  

[Evan Polaski]

@Ian Bollinger, as others noted, there is no "commercial".  Some people consider multifamily over 4 units commercial, because, from a lending perspective, you are no longer on the residential side of the bank and Fannie/Freddie conforming loans.

But commercial could be retail, office, industrial, hospitality, self storage, RV parks, mobile home parks.  And then in retail, are you talking small unanchored neighborhood centers, grocery anchored, regional malls, mixed use/urban core. 

Typically, once you get out of small-ish multifamily listed on the MLS, you are likely to need to do this on your own. If you are looking at properties listed on the MLS, you are fine to hire someone. If you are looking at Loopnet, CBRE, Marcus and Millichap, Colliers, etc type deals, these are typically deals where buyers represent themselves and are anticipated to have the knowledge base to understand the process. And if you do hire a broker, I would try to find someone that specializes in that asset class. I.e. I would not be looking at retail centers with someone that works in office or industrial. The nuances of each asset class tend to be unique from a land use, environmental, and especially valuation and leasing perspective.

[Chris Mason]

Quote from @Ian Bollinger:

I currently own several long term rentals and the goal is to branch into commercial real estate in the next 1-3 years and I'm looking for recommendations on finding good properties with the potential to cash flow. I've used Loopnet in the past but I've found many listings are way outdated. I'm located in MD but open to something out of state as well if it's the right deal. 

It is my understanding commercial real estate hasn't been booming the past few years like residential has and this next year might be a good opportunity to find something at the right price. Hoping for some inputs and advice from those who have made the transition from residential to commercial. 

Thank you!

Lots of other great commentary in here, one thing I've found is that loopnet is a lot more useful if you set up a custom search for "newly listed within the last week." The percentage of potentially good deals shoots way TF up because you're automatically filtering out all the stale ones that everyone else has already looked at and passed on. If you are done analyzing all of those and still have energy to analyze, by all means open it up. But if you have finite energy/time, then you need to focus on where you're more likely to find good prospects and play the probability game. 

It's interesting how on the residential side, my advice is essentially opposite, advising folks to look ONLY at the old/stale ones. 

[Brock Mogensen]

Build strong relationships with brokers to work your way into their "top 5" buyers. That is where the best deals are.