Architect · SF Bay Area · Member since 2024 · 6 posts · 4 votes
I have a background in architectural design and would like to get into commercial real estate investing, but I don’t know where to start. Anyone have any suggestions? Anyone know anyone who does mentoring for newbies like myself? I’d appreciate any advice.
The architecture angle is an interesting one. are you looking to start working in the space or just learn more about owning and operating commercial assets?
Regardless I'd think if you reached out to boutique builders, brokers, commercial specific architects, there'd likely be a beneficial relationship there and some organic mentoring that happens.
I'm sure there are plenty of paid mentors and coaches out there, but from personal experience its been the on the job 1 on 1 time with someone doing what you are trying to thats been most impactful to me.
The architecture angle is an interesting one. are you looking to start working in the space or just learn more about owning and operating commercial assets?
Regardless I'd think if you reached out to boutique builders, brokers, commercial specific architects, there'd likely be a beneficial relationship there and some organic mentoring that happens.
I'm sure there are plenty of paid mentors and coaches out there, but from personal experience its been the on the job 1 on 1 time with someone doing what you are trying to thats been most impactful to me.
2. What financing mechanism will you use? What is the downpayment %?
3. Size of deal. Say you have $100,000; downpayment of 25% required. Then you can do a $400,000 deal.
4. Now that you have the size of your deal start talking with folks and looking for opportunities. This will help narrow your Buy box and make your efforts more fruitful.
Use your architectural design background to your advantage. Look at commercial and industrial listings with realtors. Look for the Nastiest looking property. Nasty doesn’t mean dirty☺️. Could be an old church. Just no one sees the value. “You” will be able to see the potential value where others can’t. Take the cheapest property and do value add. Do about 5 deal analysis in paper before you think about investing.
Great question! You said your were interested in investing in commercial real estate but don't know where to start.
The thing to know about commercial real estate, like residential investment real estate, is property management is where you make your money (aside from buying well). You want to add value and reduce expenses.
Also, it is wise to have a healthy liquid reserve available when buying commercial real estate.
I would call commercial real estate brokers and find one with a teacher's heart. They are out there. They can introduce you to all the local players you will need like property managers and lenders.
Over time, increase your own personal knowledge and development with books, podcasts, and conferences on the topic.
But finding a commercial real estate broker with a teacher's heart will go a long way to getting you started.
As @Account Closed mentioned, the first question is to decide if you want to invest actively or passively. If you want to be an active investor, to be successful, you need an advantage. That could be market knowledge, ability to rehab a property - something that can give you an edge over other experienced RE professionals in the market and asset class you are working in. If you want to be a passive investor, you need capital, information and a network, but you don't need specific advantage in real estate.
Many people start out active because they want exposure to real estate and don't know that you can start out passive - you can effectively hire the asset manager and supply capital to the investment.
You can have great success as an active or a passive investor - but it is important to understand the difference and to select whichever option matches your skills and resources the best.
Hey! So many great insights here! First, I'd suggest getting familiar with the basics of real estate investing—property types, financing, and market analysis. Networking is huge, so connect with others in the industry, and look for mentorship programs (there are some great ones out there). I'd also recommend diving into books, podcasts, and even attending real estate events to start learning more.
Here:
Learn the Basics: Study property types, financing, and market trends.
Network: Attend events, connect with pros, and build relationships.
Find a Mentor: Seek guidance from someone experienced in commercial real estate.
Start Small: Look at smaller deals or partnerships to get your feet wet.
Take Action: Once ready, start evaluating deals and making offers.
The best way to find a quality mentor is to go to local meetups and meet people. Join a mastermind group of similar investors. Learn all you can. It takes time to get the required knowledge.
Are there banks or financial institutions that would grant a loan at less than 25% down, say 10% for someone with exceptional credit?
@Account Closed In my experience, lenders only adjust the interest rate for someone with greater experience in real estate development. They have "minimum" credit scores to qualify for a loan, but the higher the score doesn't change the interest rate. For example, one of the lenders I deal with requires at least a 700 score for "rookie" developers with no experience and requires a 25% down payment and charges 13% rate and 2.0% fees. For a "Professional" developer, defined as someone with 24 projects in the last 3 years, the minimum score drops to 660 and the down payment is only 10% with a 9% rate and 1.0% fees. Hope that helps.
When purchasing a commercial real estate property, are there additional fees like closing costs and other to account for?
@Account Closed - Yes, I generally advise emerging developers there will be anywhere from 5%-8% in closing costs (depending on the size of the loan), which include lender costs/fees, attorney's fees, and title fees, plus any other consulting fees.
I have a background in architectural design and would like to get into commercial real estate investing, but I don’t know where to start. Anyone have any suggestions? Anyone know anyone who does mentoring for newbies like myself? I’d appreciate any advice.
Your background in architectural design is a great foundation for commercial real estate! To get started, consider learning the basics of market analysis, financing, and property types (office, retail, industrial, etc.). Networking is key—look for local real estate meetups, join groups like BiggerPockets, or attend industry events. Some investors offer mentoring, so reaching out through forums or LinkedIn could help. Also, exploring books or courses on commercial real estate investing might give you a solid start. Best of luck!
@Account Closed happy to spend an hour with you over zoom and see what type of guidance or direction I can give you. I made the transition to commercial about 8 years ago and happy to lend my insight
I have a background in architectural design and would like to get into commercial real estate investing, but I don’t know where to start. Anyone have any suggestions? Anyone know anyone who does mentoring for newbies like myself? I’d appreciate any advice.
Hello!
I've been doing investment real estate for many years and the biggest way to get started is finding a commercial real estate market you can afford as the biggest hurdle. If you don't go into what you can afford, then you have to get into teams and syndication where you build the funding to buy larger commercial real estate. I started in cheaper states and built up from there. Then the more money you have, the more tiers of real estate open up. I mentor people in the business and have mortgage and real estate licenses. If not me, find someone in the business who needs help with the grunt work that he is too busy or lazy to do, and do it for him. That's how my current mentees got with me. Haha
I have a background in architectural design and would like to get into commercial real estate investing, but I don’t know where to start. Anyone have any suggestions? Anyone know anyone who does mentoring for newbies like myself? I’d appreciate any advice.
@Account Closed Hi Eva! With your background in architectural design, you're already ahead of the game in understanding spaces and their potential! I'd be happy to share some insights or point you in the right direction—feel free to DM me, and we can chat further.
Eva, trying to answer your questions here that you dropped in the thread.
1.) In regard to the best interest rates, the market is pretty fragmented so it's best to check around wherever you are looking to establish your foot print. For your first commercial deal, your best home is probably going to be with a local community bank or credit union. Join a local facebook RE group and ask who the best commercial lenders are and ask for a point of contact instead of just the name of the bank. Not all loan officers are created equal so if you call up a branch, you are likely to get assigned someone inexperienced. You'll find that interest rates will vary from bank to bank. If it's a matter of a quarter point but the more expensive debt is with a bank that offers better other terms like amortization and LTV, and they have a rock star loan officer, I'd go with the slightly higher interest rate product.
2.) Profitable and stable are two words that have a negative correlation. It's a matrix where you'll want to find something that is on the spectrum that is in alignment with your risk tolerance and understanding. Multi family is the most stable but also is more profitable than Single Tenant Triple Net Lease properties. This is something I would have to dig into your background on to properly advise on which asset class might be better for you and also how much management intensity you desire and/or can handle.
3.) Percentage down. Typically speaking 20% down (80% LTV) is the bare minimum that commercial lending requires. 10% down is unheard of unless you are getting a great deal and negotiate some small seller financing in second position or getting an SBA Loan for acquisition where your business will occupy over 51% of. The other thing to consider is that a bank might do 80% loan to value but also require a Debt Service Coverage Ratio of 1.2. Which is its a low cap rate deal, you might need to put 40% down in order to meet the banks DSCR loan covenant. I've done deals like this where I've had the seller hold a small second, subordinated to the banks 1st position mortgage, with payments to the seller deferred until balloon payment which I make coterminous with the bank's mortgage.
4.) Additional Fees. Yes there are expenses other than a downpayment. You'll have your standard recording fees and mortgage tax, etc. But you'll also have a bank attorney fee, your attorney's fee, a commitment fee (sometimes equivalent to anywhere between .25% to 1%, appraisal fee, environmental fee. One slick trick that I've used on reducing the mortgage tax is, I'll see if I can get the sellers bank to assign the current debt to my bank and consolidate it with the new debt I'm putting on the property. This has saved me hundreds of thousands of dollars.