Wholesaling commercial property

I posted this in “Commercial, Mobile Homes…” but thought this may be just as appropriate:

"…I’ve browsed here for a couple of months, after finding this forum doing research on wholesaling. I got cold feet and was reading as much as I can to stall actually doing anything! I think I’m ready to go and have been using the last couple of weeks finding phone numbers of prospects I found using “driving for dollars”. But haven’t started making phone calls yet. For me, making phone calls would be better than mailing post cards as I am working on limited funds.

However, I’m curious about something. While driving around, I see many vacant commercial properties. And they have no leasing or for sale signs. A former daycare, a nice size church across from my home that used to have a for sale sign but no longer. A former small office building, turned night club, that has been vacant for 3 months. A former beauty salon near a university that has overgrown hedges that has been vacant for at least a year – no sign. and many more. Looking up registrar and assessor records do not show any sales so I’m pretty sure they are still available.

Is it possible to capitalize off of these in any way? I know commercial property takes longer to sell. And many commercial agents specialize in a certain area and have pre-vetted leads. But for someone like me, is there a way to get in on vacant property like this? Anyone work commercial wholesale?

Yes, it is. I know people that do just that with apartment complexes.

I met someone at a local REI meetup that wholesales apartment complexes. But I was wondering more about these other types of commercial properties. I suppose if I get my license I could list them. But outside of that, what can be done?

Shpgrl, You don’t need no stinkin RE license to market properties. Just get these properties on contract for the lowest possible price. Your gonna need some negotiation skills here. Let the seller talk and you will get some clues on their distressed level, if they want 175K for a junk commercial property and are complaining about taxes and upkeep and vandalism and the economy and a spouse dying etc, Your in a position to say, listen Mr. distressed seller. This economy sucks for selling these types of properties and the fact its in a bad area and needs so much work, I’m at $80,000 and that’s all cash.
Once you have it locked up with a 45-90 day contract. Start blasting it all over the internet with Craig’s List and Aback page and others. Add $15,000 for your fee.
Now get out there and make some money.

I looked into commercial RE investing for a little while when I was up to the limit of 5 residential mortgages. And if done right, commercial properties offers larger rewards.

I met with a variety of sales reps, brokers etc., and found I had a lot to learn. I met with store brokers, business brokers, besides real estate agents. Last and not least, I had meetings with the town planning department.

Having gone thru this, I found commercial to be more complex than residential investing. At the time, I was also looking to buy a laundromat, and it turned out I learned more about commercial real estate from the laundromat store broker than anyone else.

To start with, I found there are different types of commercial properties. There’s downtown, strip malls, and free standing ones outside of downtown and strip malls. Each have its own characteristics.

My guess is the ones you saw are free standing ones, and I assume some of them are clustered together. If you have vacant churches, daycare, and night club clustered together, then you’re talking about an area no longer attractive to customers, and usually this means there are more updated shopping areas nearby. Why go to a free standing dumpy looking laundromat if there is one at a strip mall where you can go next store, enjoy a snack, while your laundry is being washed. Besides, its safer at the strip mall at night.

Let me touch on the town planning department. In our area, they issue permits if you do any alterations, and advise you what to do, i.e. what permits are needed for a business you plan to open. They’ll advise you if there is a master plan for the area, so if you decide to invest, you’ll know what will happen, good or bad, in the future.

I was looking at a strip mall for sale with a restaurant in it. Fortunately I stopped by the planning department and was told the new owners have to bring it up to code. They require so many parking places for so many seats in the restaurant. The good thing is, the strip mall had available land they own next to it which can be paved over. Turned out the seller was fighting the town on it because there is a public lot across the street. The town felt it dangerous for pedestrians to cross the street at busy hours.

The agent and seller claims they know nothing about it. Under the circumstances, would you as a wholesaler know?? While I did not buy this strip, its good to know if you’re negotiating a purchase.

My take is if you’re selling commercial properties, you’ll have to demonstrate to the sellers you know something about the property, and the area, other than the property is vacant. For instance, in selling laundromats, the store broker bought me to nearby laundromats to show me why some of them are doing better than others. Sometimes it has to do with traffic patterns and other times, if there are things to do nearby.

Certainly, its more you need to know compared to residential investing. For someone starting out, visit the local town planning department for areas you are interested in. Make up some story that you represent some people looking to start some business nearby, and see what they have to say. Remember, the battle cry nowadays is “jobs jobs jobs …”

Hey Randoskie I appreciate your input. Do you find success with backpage? Just curious. I never thought to advertise a property there. Maybe California is different though?

Thanks Frank, I suppose this is something to think about. I just hate to see these vacant properties just sit there. But I never thought it would be so complicated. I’ve been in retail over 15 years, so I feel familiar with what store owners want, but not so much other types of businesses. And working with planning boards can definitely get complex.