Commercial Real Estate News / Buying / 5 Tips for Buying Your First Commercial Property

5 Tips for Buying Your First Commercial Property

Published: 04-26-22 Category: Buying

Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.

Step into just about any real estate community online to discuss your first commercial property, and it kind of feels like the old Pringles commercial: once you pop, you just can’t stop!

The first property is always the hardest because it’s new territory with many moving pieces.

But buying your first commercial property isn’t just a matter of rolling the dice: there are concrete tips for making it work.

#1 – Get Clear About What You Want to Buy

Did you know that there are multiple types of commercial real estate to purchase? It’s more than just multifamily housing (more than four units is considered commercial property) and maybe a storage facility or two.

Car washes, fitness centers, land, storage facilities, data warehouses, and life sciences labs are all examples of CRE.

All of them have value, but some types of property will be more challenging than others.

For example, there could be plenty of motels for sale in your area, but do you have any experience in running one? Stick to what you can manage.

#2 – Consider Ways to Lower Your Risk

This tip is two-fold: lower your risk as much as possible. This isn’t just within financing but also in the type of commercial property that you pick. Some properties are going to be riskier than others.

For example, if you’re trying to buy restaurant space, you will run into the hurdle of either trying to run a restaurant or finding someone who can. That’s a bit risky.

Compare it with a car wash that’s already in an area where people are used to going to get their car wash needs handled. The two are very different and have different pathways to profitability.

#3 – Grab Financing Early

Unless you’re a PowerBall winner, the chances are good that you’re going to need financing. However, financing comes with its own set of challenges. You are, indeed, tasked with making yourself look good to the lender. Shop around.

Don’t be afraid to talk about your real estate plans. If you have residential properties, be sure to mention that. If you have a partner who will become involved, mention that.

One of the biggest reasons commercial real estate financing gets delayed is that first-timers underestimate the amount of paperwork required for financing. Don’t be that person.

You’ll need to make sure that your financial house is in order before taking on financing.

#4 – Go for Smart Research, Not Just Scrolling

Everyone talks about research when it comes to buying your first commercial property, but it’s time to research smarter than you ever have before. Indeed, looking at some of the free commercial real estate listings isn’t enough.

You have to get off the computer and start looking at the property. While this might not always be possible with every commercial property, your first deal should be on a property that’s within your physical location.

Looking at the property up close also lets you study how congested the traffic can become around the area, something that a lot of newcomers often overlook in their quest to have an income-producing property.

#5 – Negotiate to Close, Not to Win (At All Costs)

One of the hardest lessons to learn in commercial real estate is just how vast yet small this world really is.

For example, take the deal process: are you working with the seller to close on a property, or are you more concerned with winning at all costs, even if you create a sore loser?

Here’s what you should keep in mind:

There’s a big difference between getting the deal through a win-win and getting the deal by steamrolling the other person.
One deal is great, but building relationships lets you have a collection of deals over time, which is far more profitable.
Sometimes a deal may require you to make compromises. Make them and live to build a better deal down the road.
Try to understand what the seller is really looking for, which can help you negotiate better.

These are just a few points to keep in mind as you figure out how everything is connected. Negotiation has its own set of books for a reason, but don’t expect perfection out of the first deal. You’ll learn a lot more that way.

Building Your Network

Although it isn’t one of the tips above, building your network is the best way to go from your first commercial property to a full portfolio stuffed with income-producing beauties. Why?

There are two big reasons why you should focus on building your network.

One, you don’t want to play lone wolf because it creates isolation that makes it harder to have a real business. Nobody is an island in business anyway: we’re all learning from each other. If it was possible to be isolated, no one would ever share any information.

Two, you don’t always know what you don’t know, and being part of the commercial real estate community at large exposes you to new thoughts, new asset classes to explore, and plenty of support.

Real estate people love talking about real estate, so it isn’t like you’re making their lives difficult by asking questions about a subject they enjoy.

The Ultimate Tip: Trust

If you do nothing else from this guide, start here: trust yourself to get on the ladder. Sometimes chasing the elusive ladder leads to a lot of paralysis instead of bold, forward action. Trying to make your first deal perfect just isn’t going to be productive.

Plenty of seasoned commercial real estate people will tell you that a deal will never be perfect. Striving for a perfect deal where all of the stars align doesn’t lead to a successful investment career.

However, many people are still building on their commercial real estate portfolio 5, 10, 15, and even 20 years later because they chose not to let the setbacks hold them back.

You can join their ranks, but it does require action and research.

List & Browse Commercial Real Estate for Free on MyEListing.com!

Sign up for a free account and get unlimited access to our free commercial real estate listings, demographics reports, accurate local market intelligence, customized property type alerts, and more.