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 …”