I've dabbled in commercial real estate off and on throughout my career. Its fun, and the rewards can be great... if you can actually sell it! It's tough. Turn-around times are much longer, the advertising is much more expensive, and if your property isn't advertised in just the right places, it probably isn't being considered.
My specialty is residential property, like most of you. So, naturally I was puzzled when I started working with commercial real estate when I realized that things just didn't work the same as residential.
First of all, just so that you are aware, commercial real estate is WEIRD. People are strangely secretive. You'll be hard-pressed to find inside information from agents that sell strictly commercial. You'll also find that many of your buyers and sellers are very secretive. Many won't tell you their name or who they are with until they are completely ready to make a move. There are a few things that I've learned just from digging around and from trial and error in my limited experience.
First of all... where are all the listings? My local MLS certainly had a few of them, but there are SO many properties out there that aren't even on there. Why? It took me a while to figure this out, but with commercial real estate, you aren't working with local buyers. Most of the buyers may come from out of state, out of the region, or from the other side of the country or world! Advertising on your local MLS is certainly a good idea, but don't expect to find too many buyers from that angle. While there might be a few, your best bet is to join a nationwide MLS system, like LoopNet.com. LoopNet has almost become a standard for commercial real estate, but if you aren't doing very much commercial work, then you probably don't even know it exists. There's a monthly fee if you want your listings to be shown to the general public, but you can peruse the website and have limited access with a free account.
Sales data is very difficult to come up with. LoopNet has limited sales data, but usually pinpointing the value of a commercial is tough. Last week I was contacted by a company to perform a Broker Price Opinion (BPO) for a hotel in the small town of Hamilton, AL. In case you didn't know, Hamilton has only two hotels, so obviously there is a serious lack of comparable data out there. The nearest sales data was 34 miles away. After that was another one 56 miles away. Pretty soon I was out of options and was forced to consider the type of community Hamilton and compare it to other communities throughout the state that are similar in size and type, then use sales data from there. Even though it was difficult for me to use comparables that were 200 miles away, when it came down to it, I really had no choice. The towns were similar, the types of hotels were similar, and the real estate markets were similar.
You'll have to make good use of court house records and data from tax appraisers in order to make it work. You'll have to get in touch with local Chambers of Commerce, local and regional economic development groups, and other commercial real estate agents, but if you're resourceful, if you are up to the challenge, and if you want to tap into a slow, but potentially lucrative market niche, commercial real estate just might be your thing! If you're not a commercial full-timer you'll probably want to supplement your "commercial habit" with a few residential sales, but I've enjoyed it so far!
Got any Commercial Real Estate tips or tricks you're willing to share with the rest of the real estate world? Please comment below!
Joshua B. Pettus
President/Broker
Home Grown Real Estate
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