Over the past several years, I've had a deep desire to start my journey in REI (specifically commercial). Currently, I have a small residential solar sales business that has done alright. However, it is not what I want to be doing any longer and I've known this for some time. I have reached out to everyone in my circle to connect with people in commercial REI. I have also gone outside of my circle. I've offered to work for free many times. I've even gone door knocking to find someone/anyone in the business. I listen to podcasts, read books, forums, youtube, etc., but I still feel I'm not moving in a clear direction and am not much further than where I was 6 months ago. I hear about people constantly that got their start in REI because of the right people. I've contemplated spending $20-30k on coaching but every-time I'm about to pull the trigger, someone encourages me instead to work for a firm or keep growing my network to find the right people. Basically what I'm saying is- I feel stuck. I don't mind working for someone to learn, but is my approach wrong? I know so strongly what I want, but can't seem to find it. For anyone that can relate or understands this, what advice can you give me? A job and a steady paycheck isn't the goal, but is it smart to find a job in REI first? The thought of going any longer without taking the right action steps keeps me up at night.
I can tell you everyone's journey is different. Some grew up in REI, some started small then scaled, and some others hired mentors. What is right for them may not be right for you. Reading your post, you seem incredibly motivated. There are some many options: work part time in both until you're on your feet in REI, go head first, etc. The net of it is, it sounds like you need to make a decision one way or another and move forward with it. Decisions are seen as good or bad in hindsight because we have perspective and information we don't have in the present. Personally, I like having a coach to help hold me accountable and push me when I may be dragging.
How exciting! Also new to CRE investing and have been doing a lot of reading, listening, learning. There is a barrier to entry (as I have been personally discovering) to CRE but hope to take action this year. Would be happy to connect here to network/share any useful information. Best wishes on your journey!
Unless that residential solar sales business is absolutely killing it...I think you are nuts to spend $20K on coaching.
Save your cash, sell your expensive car, eat rice/beans and then switch it up with beans/rice...once you have enough, put a super low down payment on a 4-6plex and live in one of the units while your tenants pay your bills and add cash/equity. Save more cash.
Now, put 20% down on a small local strip mall. Off you go in CRE!
IMO I don't see what's wrong with starting small. If you're really interested and wanna play the long game why not start small with single families or multi-families that you can add value to using forced appreciation. If you just go for it, you'll be building skills that will help you in the industry and you're network because you'll be meeting agents, contractors, investors, wholesalers that you might do business with in the future. When you are ready to scale to larger projects or meet the right partner, you can sell those properties for a nice profit and use the 1031 exchange to funnel the money into the larger deal that you find.
Here's "a" path, I'm not your mentor.
If you have already done this, then its a matter of pulling the trigger. Read my post to another new person, about calculating their risk of failure. Although people are talking about success, their real reason for not pulling the trigger is they can't understand their risk of failure.
Recommend you do the following:
1. Stay in your "Lane". Build off your "Sales" background, business management and Solar. Don't start from ground zero.
2. Commercial Real Estate is a wide ranging field. Recommend you do a sample at first, then narrow down your field and get into that "Lane".
3. Lets do some exercises. If you have already done this and are stuck, then go to my post above about risk of failure and do that exercise.
4. Develop the following:
a. Cost and revenue model spreadsheet. Recommend you build one. This forces you to understand the concepts. Later you can use one you find. Get people to challenge it. Use BP. Join a local REI investment group. Start to disassociate with everyone who lets you know you will fail. Because there will be every reason "to" fail. That's the fun after a while of doing REI or development.
b. Develop a project or property review checklist. See my post on Checklist 101 for Self Storage. Change it to fit your type of Commercial.
c. Develop a contact list. Name, profession, phone, address, email, etc. Don't just fill it in. As your engaging people, ask for who they recommend. Realtor, Attorney, Zoning department, electrician, plumber, banker, insurance, etc. This will become your team. Don't penny pinch them or treat them as workers. They don't need you.
d. Here's a test run. Look up Loopnet San Diego, Carlton Oaks Drive, Santee, CA. Put a business model together. Do all the research to buy and develop this property into a Solar Farm. Don't just look at the obvious. Example: make money making electricity. Your in California. Sell to other people "Green". Your going to find every reason this project won't work. Walk thru the process to make it work. Zoning, rezoning, wetlands, etc.
e. How much money you have? Don't want to know. Make an offer on this property. They are asking $182,000. Offer $50,000 subject to 30 day due diligence and zoning changes if needed; or wetland study, etc. If you can't do $50,000 offer your amount $xx,xxx. What happens if they accept your offer? Your a sales person. 3.47 acres of nature in San Diego? Think Tiny house, camp ground, rental day park, open air wedding, etc, get crazy.
f. As your doing this, develop your checklists, models and contacts. Access, zoning, water, sewer, insurance, fire hydrant, etc.
g. Have all of the above reviewed. Tell the story and ask for input or other peoples spin on the project.
h. Done with that one? Try 3940-3946 Alta Loma dr, Bonita. I like trash. Figure out the angles to use on this property.
Each one of these, put a post on BP. Tell all of the info and what angles. Ask people for the angles they would have taken on all aspects. Bargaining, financing, use, etc.
After you have done 10 analysis like the above. Your ready for Commercial REI.
I didn't learn stock market investing until I actually invested in the market. Made a good profit on my first 19 trades, then lost it "all" on the 20th trade. I got too "smart". Learned an investment can truly go to zero. Luckily I had already asked myself the first question above, what is my risk of failure.
Start small and Make Your Big Mistakes Early.
Look forward to your posts on your analysis.
Hi Michael! There's a lot to take in when getting started, and it can be easy to feel stuck. Hang in there! Also wanted to share that BiggerPockets is launching a pro-exclusive 12 week Rookie Bootcamp in late August, with Ashley Kehr leading the way. It's a mix of on demand videos, live Q&A sessions, and a step-by-step curriculum to help you get your next deal. Sharing in case it would be helpful to create a structured learning process and action plan while meeting likeminded folks! You can learn more here.
Do you know what a motivated seller looks like?
Thanks so much for the insight. I completely agree with you. I need to make a decision on what path to take. The past week I've been reaching out to coaches and brokers and plan to go full speed.
Excited for you and your new journey as well and I wish you the best! Thanks for the encouragement and I'm definitely up for connecting.
I think $20K is a bit high as well. I found a mastermind that meets virtually each day with different people from an investment firm for $3k for the year. Sounds a bit better. I love the idea of a 4plex but am wondering if I may need to do it somewhere that's NOT San Diego? What do you think? A bit pricey here. Thanks again, bro!
Starting small might be my best bet. Of course I want to go as big as possible in the beginning, but that may be the best way to get a foot in a door. Those relationships are exactly what I'm looking for. Your advice means a lot, thank you.
Wow! I love this idea. Very practical and I can start it right away. Your in depth response is amazing. Already started on the contact list, just need to keep pushing. Having a sales background, I'm prone to want to make deals happen quickly and smoothly for both parties. However, I'm realizing this is much more education and critical thinking in order to build the foundation first. I really really appreciate it, Henry.
Great, I look forward to this being released. Thank you!
@Michael Sabosky I know it can be frustrating to get started - it was like applying for “entry level” jobs out of college that required 5-10 years experience.
I would recommend you do one of two things or both. Find a commercial property management or development company and try to get a part time or full time job with them. Use your time there to learn as much as possible but more importantly make connections.
Secondly, buy some type of investment property right away if you don't already own one. House hacking a 2-4 family would be ideal as you could get in with low money down and gain multi-family experience. Even though it isn't commercial property a bank lending to you for future CRE deals will look favorably on the fact that you have some investment property management on your resume - some banks may even deny you if you don't have that experience.
"I've contemplated spending $20-30k on coaching"
Since that money will be gone anyways, why not jump into the "fire" and buy a cheap property in the Midwest and learn hands-on?
You'll learn more hands-on than in any seminar or training!
I started with an 8 unit building 14 years ago this month. I didn't know a damn thing when I started.
Never took on an investor and have nearly 2,000 units today.
The trick to starting is to start. Find something. Doesn't have to be a home run. I think your "Problem" might be that in San Diego its hard to grow and scale as the cash flow isn't here to be able to add value (via increased NOI) and sell / refi to fund the next job as most deals have going-in cash flows that are very low and often already take upgrades into account. That's why I started in Houston. But again, easier said than done as I moved there for a while to get it all going (before coming back to San Diego 6 years ago. Wow, that means as of next year I'll have been back in San Diego for 1/2 my companies existence)
Forgive me, but the whole coaching thing is nonsense in my opinion. You can coach someone on how to ride a bike, but they will never learn how to actually ride a bike until they actually do it themselves. Commercial RE is more advanced than residential, a lot more financial savviness is involved. You gotta learn how to ride a bike first before competing in the X Games. I think most people will agree that it's best to start off investing in residential properties, learn and get used to the income/expense involved, then go small scale commercial at some point. I don't think I know anyone who went from complete RE newbie to commercial RE investor without anything in between.
If you have 30k to spend on "coaching", you should really consider getting preapproved for a 25% down conventional loan and buying a house in an inexpensive area of central California and renting it out.
Before you cross the finish line you have to cross the starting line. I see Study and Action as two equal parts Yin/Yang. You have to continually be doing both. Paralysis by Analysis = Death.
@Michael Sabosky i understand the feeling. everyone path is different but here is mine, maybe it can help. I started with buying one small single family house and then from there I used that as momentum to buy a duplex, this led to more hands-on learning, and experience which has led me to acquire another duplex. Now that I have proven the concept for myself in the small multi-family realm, I have decided to go bigger and go after bigger multi-familys, so I am currently on this path which involves calling brokers, analyzing deals, raising money in my immediate circle and also attending multi-family events to meet potential partners interested in the same asset class that i am going for.
not sure this helped but it is a matter of deciding which part of commercial real estate you want to pursue, what do you bring to the table? (deal analyzing, raising capital etc) and hunting for the piece that you are missing, which i am currently doing at the moment.
@Michael Sabosky I understand your need or desire to start with Commercial real estate but have you considered scalling that down for a start? I believe you learn and grow with time and experience. so starting my managing a single or multi family homes could just be what gives you the opening to scale up to Commercial. I also think doing the basic things towards achieving your goals can help too like getting pre-approved, getting an agent to set u up with leads, analyzing deals and making a few offers.
I strongly believe you have what it takes to do this, if and when you get a deal you can figure the rest out.
That's my philosophy.
Good luck man.
@Michael Sabosky have you clearly defined an objective and criteria? If not, start by doing that. You'll find once you clearly define your objectives and criteria, things start to come in to better focus. What is it that you feel you don't know and where can you go to get that knowledge?