I believe that money can be made in a variaty of ways in real estate. Just because I don’t know how to do it doesn’t mean it can’t be done. The question was why bother with residential. The answer is that all real estate is local. In some local markets it makes more sense to do commercial than in others. If somebody could show me how, I may do it. I just haven’t found anybody that can tell me how to make money in commercial. My question is how do you make money in commercial?
Fair enough…
I make money in commercial by actually BUILDING my properties.
That alone usually saves me 30% right off the top. By building them myself I CREATE whatever the market is paying good money for.
I started out as a builder. Residential homes. Got into developements, roads, the whole show. That is a HUGE advantage for me. Most guy’s get overwhelmed by the costs involved in developement. There are ways to do this and save a LOT of money. I don’t build roads anymore. Too expensive, too much equipment, too much labor. I build my properties on EXSISTING roads and LOVE converting sinlge family homes into commercial office space.
When you get into commercial real estate you better be prepared to start attending NUMEROUS political functions. This is where the projects get started. You attend a fund raiser, make some connections, know WHO to talk to, and they know who YOU are, now your off to a decent start. It’s all a sales job. Hire the right attorney, the right engineer, and lay out how your new office building will bring X amount of money into an area that has an abandoned home on it bringing in nothing but complaints to the city and you have a potential PROJECT!!
It sucks that you have to do it this way but it’s the reality. Buying single family homes doesn’t involve politics. You just do it. When you get into the commercial world it’s a whole new ball game. It’s not a hard game to play, but most people don’t even know where the ball park is. Never mind how it’s done.
So in a nut shell…I buy land or buildings that I can CHANGE. By changing that land or building I create something of value, that is in demand. It is a lot of work at first. The pay off comes once the project is done. At that point unlike residential you just sit back and deposit checks. In residential THAT is the EXACT time the REAL work starts. TENANTS :banghead
Here’s a real world example…Ugly burned out house on a main commercial road. Some difficulty with an estate that the building was in. I paid to fly one of the family members who didn’t want to sell up here to actually SEE the building. He thought his brother was BSing him about it’s condition. Put the guy up in a nice hotel took him out to breakfast and found out he LOVED old Shelby Mustangs.
I have a 1966 Shelby Mustang!!! BINGO. Took him to my house, drove the car around with him for the day. Just had a nice time with him. Met my family. Signed, sealed and delivered NEXT day. Still talk to him.
If I hadn’t gambled on a $500 plane ticket for him the deal NEVER gets done. That’s why no one else GOT it. They never TRIED to solve the PROBLEM. This guy thought he was being screwed. He wasn’t. It took a plane ride to convince him. I converted that house into a Doctors Office Building. It generates over $100,000/ year NET!!! I’m NEVER there for ANYTHING!!!
That’s how I do it. You can’t drive around and ask how much that completed commercial building is?? I’m the guy who built it. And NONE of you are getting a deal :biggrin
Thanks for the positive feedback on my comments fdjake and propertymanager…
Fdjake…You have a decided edge with your unique background with building. I think the two most important skills you implement are creative problem solving and going the extra mile. You could be successful in any and all avenues of Real Estate (or anything else, for that matter) by implementing these, but I can certainly understand not wanting to deal with residential tenants…LOL
On the flipside, Commercial success does seem to demand the political contacts and connections you speak of, where residential does not (or to a lesser degree). For people who get into R.E. in order to become more independent, escape their boss, the 9 to 5 and office politics associated with it, this may come across as a frying pan to fire scenario.
But it could be a small price to pay if they do not have (or do not want) the skills to deal with residential tenants, be bothered seeking out unique properties that will attract the most qualified tenants, etc…
You hit it right on the head.
EVERYTHING is a trade off. In commercial property you don’t get dirty.(not that I mind that, spent a lifetime doing it) You spend your time on deals/projects. In residential you spend you time DEALING with tenants.
Your 100% right. To some folks dealing with politicians VS tenants is a toss up. That’s the great thing about Real Estate Investing there’s room for everyone!