Nov 10 2020by John Matheson

5 Success Tips For Any Commercial Real Estate Investor Or Developer

Commercial Real Estate has so many moving parts in comparison to residential real estate. But, it's that mentality of having to deal with so many moving parts that can cause the biggest mistakes to happen. Here are five success tips for any Commercial Investor or Developer.

Create A Due Diligence List

As a professional developer or investor, learn to create a due diligence list and stick to it. After all, staying on top of that list means you've taken the time and effort to invest in yourself. For example, paying a lawyer, building inspectors, structural people, consultants, you name it, all of which can be very valuable.

Protect Your Valuation

Sometimes, developers or investors decide to invest in their own MAI appraiser to analyze a property before a bank appraiser. An MAI appraiser is part of the Appraisal Institute that focuses on commercial real estate, rather than residential. An MAI appraiser will do a workup and now as a developer, you have back up against a bank appraiser.

In reality, that typically costs $2,000 or $3,000 per major commercial real estate transaction. One of the worst things to hear when it comes to commercial development or investing is that your valuation is wrong. Always try and protect your valuation and get an additional workup.

Get Educated

Being educated and learning the ins and outs of the business may seem tedious at first, but it's going to save you time and money. For example, let's refer back to the MAI scenario. If a developer or investor didn't take the time to become educated on an MAI, they would have to solely rely on an appraiser within the bank. But, by having an MAI educate the developer of what to look for, the developer learns how to back a property's value and is more confident going into a bank appraisal.

Build A Credible Financing Relationship

When you're doing seven-figure transactions, you can be $10,000 to $20,000 into the due diligence and the deal doesn't work. But, wouldn't you rather lose that than $200,000 or more because you forced forward? If you're going to level up in this space, build a credible bank financing relationship as fast as you can.

By building a financing relationship, you have someone you can call and talk to about a transaction. Like anything, network to find someone that you can trust. This person knows your financial situation and honestly can help sanity-check a transaction. Your trusted source will say, "How do you feel about it?" Nobody's more conservative than the bank. You listen to them. Do you listen to them and do the deal? Maybe not. You do it because you're a commercial developer, you move forward and you don't take "no" from many people. However, you do get input that is very valuable.

Network Within The Commercial Real Estate Space

Networking is a very important tool, especially when focusing in on so many projects. Sometimes, real estate investors try to be a jack of all trades, trying to learn as much as they can, but never pulling the trigger on anything.

Find an asset class you like and understand it, almost to the point of obsession, then move onto something else.

– John Matheson

Become an expert and surround yourself with people that have the same goal. We're in a specialized world. You become an expert at what you do and then you become discernible in the market. Recognize you almost hit celebrity status in your local market if you're an expert in certain things. With all the information and the tools that are available, you can become an expert in many things nowadays pretty quick in comparison to just a few years ago.