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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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