Commercial Property Types and the Five-Step Deal Process
Before searching for deals, understand why commercial property differs from residential investing: the upside can be large, but deals take longer, require bigger deposits, and demand more due diligence. this training frames the entire course around a simple five-step process that every deal follows from start to finish.
Training
- 1.
Match the property type to its business model: multifamily earns residential rent; office and retail depend on commercial leases; industrial includes manufacturing and warehouses; self-storage rents storage space; mobile home parks rent pads and sometimes homes; hotels sell nightly stays; healthcare facilities combine property with a regulated operating business. Raw land depends on comparable sales, permitted use, and development feasibility rather than existing NOI.
- 2.
Recognize the advantages commercial real estate can offer over residential: potentially bigger profits, less competition for complex deals, more appreciation potential, the ability to force appreciation by improving a property yourself, higher prestige, and access to non-recourse debt on many loans.
- 3.
Recognize the disadvantages you must plan for: it typically takes longer to get paid, due diligence costs more money up front, there are fewer total deals available, deposits required are larger, it is harder to get started than with a house, and you compete with well-capitalized, experienced players.
- 4.
Weigh advantages against disadvantages honestly for your own situation before committing capital or time, since commercial investing rewards patience and preparation more than quick residential flips do.
- 5.
Memorize and apply the training’s core five-step framework for every deal: (1) Locate prospects, (2) Prescreen prospects, (3) Construct and present an offer, (4) Follow up, and (5) Sell or refinance quickly.
- 6.
Understand that each of the five steps is covered in depth in the following sections, and that skipping or rushing any one of the five steps (especially prescreening) is the most common reason deals fail or waste time.
- 7.
Use the five-step framework as a checklist for every prospective deal: if you cannot clearly answer how you will locate, prescreen, offer, follow up, and exit, you are not ready to proceed.