Sometimes failure in commercial real estate investing comes along in small doses and sometimes it hits you right upside the head in one nasty blow. Regardless of HOW it comes, we at the Commercial Investing Center think it happens more times than it should. It’s not that you’re not smart enough to make this type of business work, or that you don’t work hard enough. Often, the problem is that an investor is too focused on the wrong area of the business.
Clinging to a Bad Deal
This is a big one. Don’t be the buyer who is so desperate he chases bad deals around the city, eager to close on something – anything. This is a heinously bad idea in real estate of any kind. Our founder, Jason Hartman, is fond of saying that you shouldn’t buy a piece of land unless the deal makes financial sense the day you close it. Take this advice to heart. It’s better to have no deal than a bad one. You must be in the position to walk away from ANY deal if it’s not to your liking. The lesson here: do whatever you must to wean yourself off the Marginal Deal Diet.
Find Motivated Sellers
The second reason a commercial real estate investor often runs into trouble dovetails with the first. Stay away from lukewarm sellers! You need
motivated sellers. If they’re not coming to you, it’s up to you to go out and find them. Our advice is to not deal with any other kind of seller. It makes your life much easier. Consider the scenario of calling an owner who is still emotionally attached to their home. You bring a creative financing option to the table. The lukewarm seller is insulted. The motivated seller thanks his lucky stars and can’t find a pen to sign the paperwork fast enough. Which one would you prefer to deal with?
Here’s something to consider. Uber-successful direct marketer, Gary Halbert liked to pose a question to his students: “If you were in business, say the restaurant business, and you could have one ultimate advantage over the competition, what would that advantage be?”
If your answer is best service, best food, blah blah blah, you’re looking at the problem from the wrong angle. Halburt’s answer?
A starving crowd!
The Commercial Investing Center
(Flickr / Miami Workers Center)