At Least Four Things to Consider… Before Investing in commercial real estate “CRE”

A week ago, I saw a blog post entitled “Three things to do before you call a Real Estate Agent” and I got to thinking about the CRE experience. While the post linked here , is wildly awesome, it is tailored to a residential buyer. Investing in CRE is much different. When investing in CRE, one uses less emotion, heavier considerations on location and consumer tendencies. Sometimes it’s about supply chain access and distribution. So when investing in CRE, what three things one should do before calling a CRE agent?

That was the question I asked of the guys upstairs. Ye ole blogger here is the new guy with an office downstairs. Just one other agent is down here, so sometimes we hear rolling laughter upstairs. It’s okay, we like to laugh too.

But seriously, collectively, the 9 guys upstairs have more than 100+ years of CRE experience. So they offered some really good feedback, which became the inspiration of this blog. While limiting it to only three things would seem logical, we came up with four. For you March Madness fans out there, consider this the “Final Four things you do before hiring a CRE Agent.” We are sure there are more considerations, but these are at lease four.

The four, not necessarily in this order are: Location, Return, Money and Power. Let me explain.

1) LOCATION: the old adage is still very relevant in real estate: LOCATION LOCATION LOCATION! We still agree, but other factors matter, consumer access, supply chain management, demographics, proximity of competition or like-kind businesses, traffic patterns, zoning, permitting process, etc etc. Some small business advisors have adopted a more modern version of the saying: Consumer Consumer Consumer. In short, how can you as a business owner position your business so more customers can access you, or more importantly, your product?

Before calling a CRE Agent, have an idea of where you would like to be. In Southeastern North Carolina, it’s not uncommon to find business leaders living inside a 3 mile ring. They work, attend church, socialize, dine out and do everything in their life within 3 miles of home. Would you, as a business owner, want to have to commute in excess of 20 minutes to your business? In our part of the world, 20 minutes is the average commute. Have an idea of where you would like to be. Without knowing, an agent might take you all over the region looking at just their listings … without concern of where you want, or should be.

2) Return: This recommendation is specific to investors. Know what kind of return you are expecting. You can communicate this early and often to your agent, who will know exactly how to zero in on specific property types. As a business owner, this is still relevant. What is your 3 year plan, 5 year plan, what do you want to achieve through this investment? Is it a future expansion, concept change, business contraction? What is the reason for moving or investing? Will investing in CRE fix your problem (or need)?

Before you make a call, have an expectation so your agent can go right to work for you.

3) MONEY: of course, RETURN leads us to talk about money. Have a conversation with your banker, friends and family. Find out how much you have to invest. Understand what it will take to buy or rent. Can you write a check for 20% down? How about 2 or 3 months of rent? What about up-fit; can you afford interior decoration, paint, moving walls, construction of bathrooms, etc.

How about moving expenses? If you are in business, someone has to pay to move the business (furniture, equipment, etc). Bottom line, the bottom line always influences decisions … know what your bottom line says before hiring a CRE Agent.

4) POWER: This may sound odd, but in this market, you have the power. Don’t waste it by running around town calling on every sign you see on a property that looks appealing. “Bird Dogging” everything that “looks like it’ll work” can undermine your power. Once you are ready to make a move, every agency in town knows you are looking and guess what … they already know what you need and what you can afford. Remember #1 above; understand where you’d like to be, then engage an agency to do the bird dogging for you.

FULL DISCLOSURE: Our firm invests thousands of dollars in signs. Why? Because we know people will call on a sign they see on a property they like. Why are we telling you this? Licensed real estate agents in North Carolina have a personal, professional and statutory obligation to protect the public. We feel strongly that when an investor or small business owner has the knowledge on their side, our entire community can benefit. “Putting your business in the right place, at the right time” is our mission, and a promise we make every client. To learn more about how our firm can help you be successful, call us (910) 791-0400.

In conclusion, remember: LOCATION, RETURN, MONEY & POWER are four good things to consider before hiring a Commercial Real Estate Agent. If you’d like more information, contact our office, we’ll be happy to guide you through the process. JH