Part II 6 "Rules of Engagement" for Buying Real Estate in 2018/2019

Market Dynamics don’t Favor the Buyer - Here’s how to get a leg up..

In my previous blog post I shared with you 3+ "Rules of Engagement" for buying Real Estate in 2018. 6 Rules of Engagement for Buying Real Estate in 2018 Part I - Part II and 3+ more Rules are below. Enjoy...

If you are planning or need to purchase "CRE" commercial real estate in 2018 or even 2019 the market dynamics can present some challenges for a whole host of reasons, including inventory (lack thereof), pricing, timing, location, etc. If you want/need to purchase a property for your business operations now is a great time to proceed as the new Tax law favors business / real estate investments and interest rates continue to remain low.

However, for as many successful transactions I’ve helped facilitate for buyers there are many cautionary tales of what not to do. But do not fear the following “Rules of Engagement” should help you succeed in the exciting a fast-moving market in 2018.

1. NO PERFECT Property - In many parts of SoCal, there really are few “new” buildings built within the last 10 years. The fact is buildings are getting older and some owners have taken better care of them than others. You are NOT purchasing a perfect conditioned building. It will have flaws, older roof, HVAC units from 1980, funky office build out, shag carpet, etc. Remember if you are purchasing for your business and understand your OCCUPANCY costs and OPPORTUNITIES most of the time these issues or items are simple and low costs repair inprovements items. Don’t fret over minor dollars because that blown deal in today’s market may mean reduce profit to your business and the next time you will spend 2x or more vs what you were trying to get in a discount. Instead go into any deal with the knowledge and budget for some repairs as part of your purchase strategy, that’s what the pros do.
2. NO CRASH Coming - I hear it often that in the next (2) years there is going to be a market crash and prices are going to fall drastically. I don’t see the CRE market through “rose-colored” lenses however the market dynamics, vacancy factors at 1%, little to no new industrial planned construction, industrial properties being replaced by multi-family projects, and projected increased GDP offer a much different forecast than a CRASH in the next couple of years. The conventional wisdom throughout the industry is that prices will continue to escalate in some case 15%-20% over the next few years. The CRASH will come again, it always does, but relying on it as an investment strategy is ill-fated. BTW - with any CRASH comes a whole lot of other negative economic issues related to the general economy, tightened lending, cash drain, decreased business opportunities which often times prevents or discourages buying property.
3. OFF MARKET Deals - this is the hidden gem in today’s market and many of the deals I transact involve an “off market” property. This is typically a seller who has expressed interest to me or other brokers about an interest in selling. They often times do not wish to put on the market for a whole host of reasons but here is where an opportunity exists. If you know your needs, opportunities and occupancy costs you can take down an off-market deal and beat others to the punch and avoid a bidding war that is ever more present today. Work with your broker and encourage them to bring you off-market deals, but you must follow the rules above because if you don’t your broker may lose interest in you and move on to the buyer who does follow the rules. Here’s a trade secret, upwards of 50-60%+ of CRE deals are done off-market and never “hit” the market for sale. So pay attention and that off-market deal might be the best one for you.
4. BROKERS make it happen - quit trying to find the perfect property yourself, LOOPNET sucks and does little to offer opportunity. Searching is time-consuming and most of the time warrants no results. Brokers market knowledge is of huge value to you, listen to them as they get paid to know the market and make deals happen for sellers and buyers. Our eyes and ears are on our markets daily and most of the time we know the deals that can work for you, or not. We are honest and try and give the facts without emotion. If it isn’t possible or available we’ll tell you and you should listen. We DO KNOW it better than most and our knowledge means opportunity for our clients. Trust in your broker they can and will make it happen for you.

BTW- if you need a broker to work with, source opportunity or just ask some questions give me a call - I love to talk business and real estate.

Thanks for Stopping By.

Cheers!

Cameron