Expanding your portfolio from single-family homes to multi-family deals is a great step … but there are other paths to an even bigger deal!
Commercial real estate investing means bigger properties and bigger opportunities … and it could yield BIG benefits for savvy investors.
From retail storefronts to office space to industrial warehouses … commercial property is full of options … each with their own pros and cons.
We’re excited to welcome to the show a seasoned investor who’s found success in single-family homes, multi-family apartments, and commercial properties. (He really knows his stuff.)
In this episode of The Real Estate Guys™ show, hear from:
- Your host, Robert Helms
- His co-host, Russell Gray
- Founder and CEO of Wilson Investment Properties, Tom K. Wilson
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Considering commercial
Real estate is a resilient product … that’s why so many people are eager to get in the game.
There are tons of ways to invest in real estate. Most investors start with what they know … single family homes. But that’s not the only way!
We see commercial real estate as a great opportunity for beginning investors … and for experienced investors too.
But commercial real estate deals are not all created equally
There are different product types, different lease lengths, and different landlord laws. And then you have to choose between existing properties and new construction.
Tom K. Wilson has done half a billion dollars in real estate with thousands of units in many different places … and he knows the perks of commercial real estate.
Like many investors, Tom started his real estate career in the single family marketplace.
We promote the value of surrounding yourself with smart people …. and that’s exactly what Tom did. He soon realized an interesting pattern.
Most of the successful investors Tom knew were investing in areas away from where they lived. By investing several states away, investors found better deals and growing markets.
So, Tom started looking elsewhere. He found the Dallas market … and his first commercial deal.
Dallas was more landlord friendly than Tom’s resident Bay Area. It also offered more consistent cash flow and held up well during the recession.
Tom noted that there were some serious benefits to owning a commercial property as opposed to single-family homes or multi-family deals.
After the 2008 crash, these types of commercial deals were performing better than their residential cousins … and they tended to come with a higher level of professional management.
Typically when we talk about commercial property, we’re talking about leasing your property to a business rather than a person.
It could be a retail establishment, a strip mall, an office, a restaurant, a gas station, a bowling alley, or a manufacturing facility … it’s all commercial!
Like every asset class, there are pros and cons to investing in each type of commercial property.
Investing in industrial
Industrial properties can include warehouses, operation centers, distribution centers, and manufacturing sites.
Professional tenants that pay for a long time are one of the best things about industrial assets.
They’re also very versatile … a variety of businesses can use a property with wide open space, offices, and loading docks.
When searching for an industrial property, note rooftop expansion and passing traffic. Can the site offer prominent enough visibility to attract major brands?
Determine the path of progress for the community … this can signal if the area has the breadth of economy to support a big business.
Tom comments that manufacturing sites in particular could offer great opportunities for future returns as manufacturing makes a comeback in the United States.
The downside of industrial sites … they tend to be a single tenant product. If your tenant goes bankrupt, you’re left searching for a new source of cash flow.
“The odds of that happening are very low if you’ve done your due diligence during vetting,” Tom says, “so all in all I tend to consider the right industrial property a very good product.”
The details on retail
If you think everything is bought online … think again.
You can’t get a haircut online. You can’t meet your buddy for a drink online. You can’t take your dog to the vet online.
Everyone needs a place to live … and they often pick where they live based on where they can access essential services.
“Retail has become a four-letter word for many investors,” Tom says. “I prefer to call these types of assets ‘neighborhood service centers’ because that is the key.”
Many large retailers are expanding their brick and mortar stores despite the online shopping craze … and online retailers like Amazon are investing in brick and mortar locations to build their brand.
Like any asset class, there’s the good, the bad, and the ugly … but don’t discount retail without the proper research.
Operating in office space
Every day, people wake up and go to work.
It’s true that more and more people are working from home … but there are still daily needs for human interaction in business.
“I don’t think it is realistic to believe we’re going to see the day where everybody’s working from home,” Tom says.
Both single and multi-tenant office spaces offer excellent opportunities for commercial deals.
Tom recommends looking for office spaces that combine work centers with service centers as the demand for more office space near entertainment venues and amenities rises.
Having an experienced team or partner on the ground that knows the area is especially important when buying office spaces. Locals will have the best read on where people want to spend their nine to five.
Commercial success through syndication
You don’t have to have a lot of money to get started in commercial real estate.
Tom has built his commercial real estate portfolio through the power of syndication.
At some point, you run out of your own purchasing power … you’re out of dollars and cents but not out of enthusiasm, passion, or expertise.
“Syndication is the law of compounding,” Tom says, “not just in numbers but in education, wisdom, and relationships.”
Partnering with those that have a proven track record, established credibility, and integrity sets you up for investment success.
And by combining financial assets, you can do bigger deals and see bigger returns together than you ever could alone … especially in the commercial space.
Like any investment, education is key.
Learn how to leverage experts through syndication and tips for successful commercial deals in Tom’s special report Commercial Real Estate – The Best Investment Secret.
Whether it’s your first deal or your first step into a new market, consider taking a look at commercial real estate investments to make equity happen.
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