Can commercial property (non-apartment) be wholesaled like residential?

Question

I am a noob, but curious if a smiliar techinique can be used in commercial - i.e. finding motivated sellers, assigning contracts, etc.  Thanks!

Chris Winterhalter · Answer

As already mentioned the answer is NO for any non-seasoned CRE investor.  And it's very uncommon unless something comes up during the due diligence process to trigger an assignment.  Residential wholesale can have an element of deception to it (not all wholesalers) and that doesn't play well with the CRE community.  It's too small a circle with too many bright, experienced, & well capitalized professionals inside.  The experienced "wholesalers" in commercial are brokers.

Bill Gulley · Answer

It's not a place for new folks to play.

Take a 40 unit motel, you need to understand the business before you can value that business, it's not just a property. Industrial plants may provide space for a soap manufacture or a cardboard box factory or a electric motor manufacture, but not a bakery, any idea why that might be? Environmental matters of past owners can effect future uses. You need to understand different industries, the business types and the aspects unique to them before you can select the best location for them.

Commercial properties can be on the market for years, not days like residential.

Non-residential commercial is beyond the scope of this site, no reason to day dream or talk about elephant hunting when you only have a BB gun. New investors need to master residential properties before they venture off into the unknown.   :)

Tim Shoultz · Answer

Agree with this.  I've looked at assigning contracts in the past, but have not done so, the difference is I was able to get under contract to begin with.  From my experience listed vs unlisted is more like 50/50 on commercial, however, having the connections in the brokerage community to get an early offer in on listed properties is huge.  You don't develop that by assigning contracts, you develop that by closing deals.  Seems like a very hard game to play.

Bill Gulley · Answer

Can it be done? Yes, it can be. Should a noob even think about it, NO. I'd say your risks of messing up would go up at least 10 times.

Thing about commercial, owner are usually seasoned RE business people, like their attorney answers their phone calls.

You use guru wholesaling techniques of find a seller, then go beat the bushes for a buyer means you may be taking that property off the market. Commercial properties can be for sale without being on a listing, most are not listed on the MLS. Most are quietly sold through the industry specific to building usage, so unless you're in that loop, you don't even know if it is being marketed.

You tie up a property under a sale contract and fail to perform or it is found that you had no ability to buy, they can sue your tail off.

If you can actually buy and later you assign a contract, yes, that is done.

If you know that a buyer wants a property, you might get that done, but any buyer wanting a building like the subject will likely all ready know of the building. They don't have birddogs or wholesalers chasing down some $5M property!

There was a news clip about 2 months ago where a RE developer assigned a contract, a $10M deal I think, he was an able buyer most likely, a well know developer with experience in commercial transactions and a RE broker. "Noobs" aren't that guy.

So, if you're curious, yes, commercial contracts can be assigned, if you're asking assigned like guruized residential deals......absolutely not and not a good idea without a great deal of expertise in business as well as RE. :)

Tim Shoultz · Answer

I would imagine it would work but I have not personally seen it.  If someone brought me the right deal at the right price I'd consider it.  I would put the payment for the contract based on performance of my own diligence and if I bought the property or not.  For the most part, commercial seems a bit more complicated than flipping an SFR contract like this.  I would imagine most brokers would not be super excited about working with someone doing this, but..with all that said, I could see it working if you could find and tie up the right asset classes.