How Not to be Intimidated by Commercial Real Estate

As the old saying goes, the only way to get over your fears is to face them. And that is exactly what we are going to do right here, right now in this article. Dispel every untruth and fear that you have ever had about commercial real estate so you can do business with a clean slate and a clear mind, so you may absorb every bit of information and learn form every experience.

Before we reveal the truth behind many commercial misrepresentations, let's address why commercial real estate insiders, or those already in the business, may try to intimidate “newbies.”

Keep in mind, these commercial real estate insiders may actually BELIEVE these misrepresentations themselves, while others are simply safekeeping a best kept secret.

Many commercial real estate insiders have worked very hard to develop their wealth and prestige in their specific market. Although this business does require fundamental knowledge and experience, it is not complicated!

Commercial real estate insiders would lead you to believe this business is complicated and intimidating in order to protect their superiority and position in the commercial real estate market. There is specific lingo, jargon, if you will, tools, styles of doing business, and other traits of insiders that separate the elite from those just starting out.

You can see this trend in any profession or even sports team. If there is a group of people who are walking, talking, and performing a certain way, and others do not understand, it creates a sense of elitism that others will strive for to be accepted into the circle as well as be successful as those people are.

Understand that these insiders are protecting their territory if you will, and they like to make themselves seem far more intelligent and powerful than they really are. I am not saying that they are not intelligent, wealthy and in many cases, powerful, but the road to success is not difficult in this business. You should not be intimidated by what they may project to you. Understand you have the same opportunities as they did, and can easily apply the fundamentals of residential real estate to commercial real estate.

Imagine if all the real estate tycoons preached “Commercial real estate is easy and everyone can succeed in this business!” (s this is the truth they DON'T want you to know). The market could then become more difficult to operate in, and competition could be further increased.

Ask yourself, why in the world would they do that?

This moves me to my next point. What is the difference between the following numbers?

$1,000,000 and $100,000

Some may answer $900,000! That is not what I see.

The only difference is one zero. One simple zero. Now just add two more zeros.

$100,000,000. See how simple that was?

The same goes for commercial real estate. The same amount of work goes into every deal, regardless of how many zeros are attached to the number. So, would you rather spend 60 days researching a property, performing due diligence, finding financing, negotiating a solid contract, employing all the engineers, developers, builders, and other professionals that may be needed to complete the project for a $3,000,000 or $30,000,000 return?

I know what I would choose. It is very difficult for people to understand this concept. However, in commercial real estate a small move will yield unimaginable results, unlike that of residential real estate. If you are going to do the same amount of work, you might as well realize a greater rate of return.

Don't be afraid to think big! This is where the true fortunes are found. And, just think, you will have less work in order to make three or four times what you would on a smaller project requiring the same input. Think synergy, and you have a winning strategy.

Still feeling intimidated? Then let's look at some misrepresentations about commercial real estate that will further your education and ease your fears about some widely accepted ideas that are simply not true. This information will pull you closer to the circle of insiders who think they know it all!

What is the number one attribute of a commercial property? Location.

Wrong! Location helps, but the most important attribute of a property is the use! Use intended by both the municipality and the buyer. For example, a beach front property that is intended to be bought by someone who wants to build a multi-million dollar home with the ocean crashing below the open window pane at night, with a full moon glistening on the water, may be the perfect location for the buyer. However, the municipality has it zoned for a bed and breakfast to help build tourist revenue and increase tourist traffic to the local beaches.

What good is the property to the potential buyer now? A bed and breakfast builder or investor may look at this property, decide it is the perfect location, and can use the property based on its intended use. The use dictates everything about a property, not necessarily the location.

If you are a broker, it is important to understand the zoning laws of any properties you may have listed under your responsibility. It may be even necessary to speak with the city to see if the current zoning is accurate of intended use, or perhaps there is a future use for this land that would allow for a specific buyer to purchase the property. Both investors and land users will rely on your knowledge of the community in order to make educated decisions about the property. The more verified information you have to offer, the more valuable you are.

Another misrepresentation is the idea that commercial real estate is very complicated and involves intense property management. Let me tell you that commercial real estate involves math, fundamental real estate techniques that are learned in residential real estate, forms, reports, legal ramifications, and large amounts of money. However, nothing about it is complicated!

Here is the miracle of commercial real estate- experts that do this work for you: accountants, lawyers, engineers, brokers, lending institutions and management companies! You will save so much more time and money employing experts rather than trying to do all this work yourself!

Look at it this way, if you owned your own business, would you develop competitive strategies, delegate to lower management, handle problems in human resources, hire lower level employees, do all the books and financials, sell your product, handle law cases, write up legal papers and clean the facilities when the rest of the employees were gone?

I think not! You have to shift your thinking when you are involved in commercial real estate. The simple fact that you can hire all the necessary experts to handle basic operations, while you construct the money-making deals, should put all your fears at ease! And as far as management is concerned, if you want to be responsible for filling vacancies in your 100 unit apartment complex while selling the newly developed condos and dealing with tenants who don't pay their rent, be my guest! But would you really do this? Of course not!

You are in commercial real estate, and not property management. Position yourself as so, and let others handle that part of the business.

The only thing you should fear in commercial real estate is how you are going to spend all that money that you make from helping build communities, providing valuable products and services to people, and creating wealth, for not only yourself, but those you work with. This business is truly unique in that everyone benefits from the efforts that you directly employ.

May your fears be calmed, and let excitement fill the void. Never should you feel intimidated by commercial real estate, but, rather, feel energized and motivated by the possibilities to, not only make money, but learn a valuable business that continues to allow our society to thrive.

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