Commercial Investing Creative Strategies - same as residential?
I had quite an interesting conversation with a broker today who happens to also be a developer and an investor. He brokered many commercial real estate deals/investments around my area. In fact, he sounds like he either developed, or had a hand buying and selling, nearly all the major commercial centers in my general area (wal mart, grocery stores, shopping centers). The most interesting part of our discussion however was the strategies he says he was using to structure these deals - buying low (really low) from distressed owners, using lease options to pay off the owner in full once he actually sold the deal on his end, buying at auctions, repairing, selling for much higher, structuring million dollar deals with none of his own money down.
I never even considered to look into commercial real estate but it sounds like much of what I'm learning on the residential side is applicable on the commercial side. Is this reasonably accurate? Can anyone share any major differences and similarities between the two?
Are all the creative, no money down, investment strategies applicable on the commercial side? Can I sign a purchase agreement with contingency to pay only after a buyer is found, on a really good deal, then locate funding from private lender (JV or interest) or even HML to eventual refinance? In short, can I also get as creative as I want (or need) in the commercial sector in the same way as it is possible in the residential side?
He invited to show me some deals in person and sounds like he could have some seriously good deals he's working on (like 10 cents to a dollar ones). It was quite fascinating talking with him. Being a neophyte, I'm just glad I was able to understanding mostly everything he was talking about. I'm definitely going to take him up on his invitation, if only to hear more of his experience, though I honestly feel a bit out of my barring here on the commercial side, understandably, since I haven't even done any residential deals.
Assuming he has an amazing commercial deal (around or below 50% appraisal), how would a rookie investor like me take full advantage of the situation without too much capital (10k, hardly worth mentioning), average credit, an self employment income? I would imagine I would need to JV with some private lenders on the deal, assuming HML is out of the question (refinancing might even be an issue). Not the greatest starting assets, but it is what it is and I need to work with what I have or go around it entirely.
Any thoughts? I'm very eager to hear how you guys with more knowledge and experience would approach or structure a really good commercial investment deal from a beginners standpoint.
with respect,
Tim