By Dike Drummond
The author has permitted the reprinting and redistribution of this article.
In commercial real estate you must have a Tight Niche Focus in order to be a successful investor.
You absolutely need to know what type of property of what size, age and condition you are looking for and what you intend to do to add value once you buy it.
It is basically a case of Focus or Fail.
If you look at every property on the market – cruising LoopNet for hours looking for a good deal – you are totally wasting your time.
This flies in the face of what many Residential Real Estate Investors were taught when they were buying single family houses.
Many single family houses buyers look for the motivated seller.
They’ll look at any property they can purchase at a wholesale price, no matter where it is, what size it is or how much it costs.
If you take this I’ll look at anything with meat on the bones mentality to the Commercial Real Estate side, you will fail … case closed.
Commercial Real Estate has so much more to offer.
There are so many different Property Flavors. Commercial is like an all-you-can-eat buffet compared to the hot dog stand of Residential Property.
Different Asset Types, business plans, neighborhoods, market forces… if you don’t have a Tight Niche Focus you will be like a kid in a candy shop. You will literally waste thousands of hours of your time and never become an expert … never build that profitable portfolio.
Here’s an Example of a Tight Niche Focus…
– 75 to 150 units
– Built in 1970’s and 1980’s – Class B – C
– Vacancy rate of over 15%, only minor rehab needed, economic loss 25% or more
– Business plan is economic reposition with quality local property management. Raise rents and occupancy to the market rates, cosmetic rehab, hold for three to five years and sell on the improved Net Operating Income
With this level of Focus, you can clearly see when a property is in your Sweet Spot and when you can say Pass.
The Four Benefits of Tight Niche Focus.
When you are focused on a specific property and a specific business plan four things will happen very quickly.
1. Find the Right Market(s)Quickly
With your tight focus you can quickly find the best Markets and best neighborhoods in those Markets for your chosen Niche.
2. You will be much more effective at screening opportunities.
The tight niche focus will allow you to quickly identify the properties that are in your Niche and say yes or no to further research instantly. You will toss any deal that is not a fit and be focused immediately on the lucrative deals that DO meet your niche criteria.
3. You will become an Expert in your Niche, very quickly.
The tighter your focus the more quickly you can wrap your brain around all the variables in that Asset Type, Asset Class and Business Plan. You will quickly learn the success factors and things to avoid in your specific properties. Only a tight focus will allow this rapid accumulation of expertise.
4. You will be able to build a Niche Focused Team.
When you can tell your team of Brokers, Mortgage Brokers, Property Managers and Field Partners EXACTLY what you are looking for they’ll be able to bring you quality leads very very quickly.
Three Steps to Pick Your Niche
1. Choose an Asset Type
Retail, Office, Multi-Family, Industrial, Hospitality, Development
2. Choose an Asset Class
Do you want a brand new, fully rented up, modern, Class A building to buy and hold for a steady return
Or or something that’s a little older … maybe Class C with some problems you can fix to force additional appreciation
3. Choose a Business Plan
Is this a Buy And Hold
Are you going to do an Economic Reposition
A Rehab Project
A Re-purposing – warehouse to residential condos, what is your business plan
And remember … Passion Counts … Big Time
Make sure your choice of Asset Type, Asset Class and Business Plan is something you can really get excited about … something that turns your crank in a way that your investors can sense your passion and are even more inspired to invest with you in this niche.
Now it’s Your Turn…
Focus or Fail
Go through the exercise of picking your Asset Class, Asset Type and Business Plan – get excited. This Tight Niche Focus will dramatically accelerate your ability to find quality properties and grow your portfolio.
Learn the street-level skills you need to build your own multimillion dollar Commercial Property Portfolio at httpwww.investortours.com Dike Drummond MD and his Texas Partner – Monte Lee-Wen – are active Investors with over $150M in Commercial Acquisitions to date. They created Investortours University to help you shorten your Commercial Property Learning Curve.
If you would like to take advantage of the market and learn how to invest in real estate and you are local to the Dallas Fort Worth area, I know a really great teacher and mentor here in Arlington Texas. Please take a look at his web site: DennisJHenson.com, Dennis has a great Mentoring and training program, I know because I am one of his former students. I learned a lot from his one on one teaching technique. – Michael Harman 817-457-7572 firstname.lastname@example.org>