Technology is changing the way CRE professionals find and close deals.
Greater cash flow potential, longer leases, and financially stable tenants make commercial properties highly attractive to investors who have grown weary of the volatility inherent to residential investing. The right CRE property can yield high profits and high operating cash flow.
But whether or not a CRE property is profitable comes down to more than market conditions — it can hinge on an investor’s ability to spot and negotiate a great deal. From checking on number and nature of existing or potential tenants to making sure you fully understand the accompanying insurance requirements, make sure you’re getting all the information you need to make a smart buying decision.
Let’s take a look at five unique ways that investors can discover — and successfully pursue — their next CRE opportunity:
1. Spot Off-Market Opportunities
Off-market deals are the holy grail of CRE investing. Not only do they allow investors to avoid the racket of a bidding war, but they typically facilitate an accelerated sales process.
The key to finding true off-market gems is to know which property characteristics are most likely to lead to those unlisted opportunities — debt and sales history, fluctuating zoning regulations, mortgage maturity, etc. — and using the right tool to research and monitor them. By constantly aggregating and organizing marketplace data in real-time, CRE data platforms like Reonomy offer investors and brokers the opportunity to research nuanced property characteristics that indicate the likelihood of a future sale.
2. Study Market Fundamentals
The best CRE investments take place in healthy — ideally growing — markets. But how can investors predict which cities are about to boom? Strong market fundamentals — low interest rates, steady rental growth, and rising property values — indicate which markets are positioned for growth and which markets are likely to experience increased lending activity (typically a sign of a healthy market).
Take a look at recent market conditions and fluctuations in different regions. Study the business climate, population density and growth, and employment rates to determine whether the market is likely to remain strong.
3. Leverage CRE Data
The digital revolution has allowed easy access to major swaths of CRE data. But without the right tool to sift through and organize high quality, relevant data points, it can be overwhelming to research a single property online — let alone compare and contrast several assets of interest.
Reonomy offers access to high quality data in easy-to-use, immediately relevant formats like comparison reports and visualizations. Users can see every aspect of a building’s sales and debt history, and can filter property information based on a number of variables, including price, location, zoning, property type, etc.
4. Speak to the Person In Charge
Speaking of data, property ownership information is an invaluable asset for brokers and investors searching for properties that may not yet be on the market — or who simply want to remain top-of-mind should a sale be likely. Not only does this save the headache of a time consuming search for contact information, but it also allows investors to determine the type of sellers they’re dealing with — the size of their portfolio, commonalities between the properties they already own and have sold in the past, etc.
5. Be Prepared to Walk Away
Seasoned CRE pros know a good deal when they see one, but they also know when it’s time to walk away. Approach every potential deal with a critical eye — is there damage that requires repairs? Does the property’s true earning potential align with your own financial goals? The most profitable deal for a particular investor could very well be the one they wisely chose not to take.
Similarly, even if a property is purchased, it’s important to plan your exit well before the deal is even finalized in order to ensure you won’t lose money on an investment. Will you adhere to a buy-and-hold strategy, negotiate seller financing, or utilize a 1031 tax-deferred exchange? Without an exit strategy, investors risk gambling away a property’s potential earnings.
Looking for up-to-date, comprehensive commercial real estate data? Reonomy offers CRE professionals real-time access to the data points they need to grow their business — from debt and sales history to zoning and building owner information. Try Reonomy National for free today.