I'm in the process of cashing out of an unrelated business, and want to pivot into commercial real estate. I'm in a position to invest $50-100k per month for the next 24-36 months, and am not sure where to start. My initial plan had been to start purchasing cheap residential properties and to build a portfolio of those. My assumption is that I would eventually hit a scalability issue and end up pivoting into commercial, so I'm thinking perhaps I should start with commercial? If you've got any tips on where I can go to start learning, that would be fantastic.
I know there are a lot of scams out there designed to lure in dreamers and then sucker them into useless classes and seminars. Are there any classes, videos, etc. that are reputable and designed for people with more to invest? If it matters, my interest is in developing in the Phoenix or Austin area.
Investing cash and developing are 2 totally different things.
Owning 100% directly for passive income and then instead being a passive investor in a syndicate or similar have various pluses or minuses.
If you are an accredited investor then putting 50k to 100k at a time into syndicated properties as a passive investor might make sense.
My clients buying commercial directly typical for strong suburban to urban core areas are millions in price and 30 to 35% down so 750k to 800k at a time with a loan for remaining balance to own directly. The sub 1 million assets tend to be in weak areas so not worth the trouble.
You could invest with syndicators and look at a spreadsheet each month for diversity. You don't make the decisions on the asset and have limited control with the exit timing, capital infusions if needed, etc.
As for being a real estate developer nobody that I know of is going to spend time training you up for free. They tend to make thousands to tens of thousands of dollars per hour for their time. They are running businesses and making money just like anyone else. There are fee for developers but they usually run 100k per project sometimes. You have to PAY for quality experience and help. No way getting around that. You could invest with a developer on one of their syndicates and see how the process moves along and learn that way. Now they are not typically going to answer tons of questions night and day they are going to give reports to investors and occasional updates. If someone wants ground up day to day training a syndicator does not usually have time for such things.
If you want to learn on your own plan on spending thousands to tens of thousands of dollars for certain high level development courses taught at colleges and similar by developers giving the course or professors. There are also books that are hundreds of dollars or more with good info.
ICSC has a book library, ULI Urban Land Institute, NAIOP, etc.
You have to decide if you really love developing or want to be a passive investor. It's all about your goals.
@Joel Owens has given you a pretty good lay of the land. I think you should start by deciding for yourself which side of RE investing you want to be: active versus passive. Here's a post to help you guide towards the right decision:
Next, select a niche you want to concentrate on. If you happen to do really well in unrelated business, perhaps you should continue working in that field and invest passively. Now that still entails learning about passive investing and a niche that you select: syndications or lending or whatever else. The important point is to concentrate on one thing at a time and not to spread yourself too thin. Mind you, if you do decide to take the active route, be prepared to work on a new business, cause that's what it is!
Here're a few more articles for additional guidance:
Reach out if you have any further questions.
@Justinian Lane there's a lot to learn when making the move into commercial RE especially when it comes to development. Best thing to do is get familiar with industry language, types and class of commercial properties (most people confuse those) and especially financing.
You have lots of options to consider in terms of getting started as mentioned above. Biggest thing is to decide is if you want to be active or passive.
@Justinian Lane first pick which areas of commercial interest you. Do you want to develop or buy existing properties? Do you want to be active or passive? Do you want to be involved in multi-family, self-storage, senior living facilities, student housing, office space, hotels, or some other niche? Once you narrow it down, search the forums and blogs here on BP for content, there's plenty of it out here. But just searching "commercial real estate" alone will be way too broad and you can't really act on something so broad.
If your capital is becoming available on a monthly basis (re: I'm in a position to invest $50-100k per month for the next 24-36 months) I would consider either:
- Invest passively with experts, learning along the way and continuing to make money from your area of expertise that got you into this position in the first place
- Save that money every month for 12+ months while learning the ins and outs of the niche you decide to focus on, then make a move
@Justinian Lane Everyone has provided great insight. I will say that when it comes to development, talk with developers. They will give you their focus and the good ones will give you the feedback of the good, bad and ugly with their respective real estate development focuses. That may turn into a partnership or a mentor. If you are interested in Commercial Development, one book that I really enjoy is not much of a "teaching" book but gives a good idea of how developers think is "The Real Estate Game" by William Poorvu. Great book of some of the mindsets and how he looks at projects.
On a side note, great areas to target. I myself am looking for a few ground up development deals in Austin and Phoenix
I would talk to your financial planner, CPA, and lawyer as well. They can offer some structural and liability advice that may factor into your decision to develop, manage, or be passive.