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New Commercial Investor Credibility

THIS article is about how investors who are new to commercial real estate present their commercial real estate projects to private equity partners and get them to say yes!

What Investors Want

In order to be successful in selling anything (such as your deal,) you have to know what buyers want and be able to give it to them. What other private investors want is:

  • Security
  • Return on Investment
  • Service

Security: In commercial real estate, security is provided by a lien against the real estate. Many equity partners will also want a mortgage, even if it is not in first position. The mortgage ties them to the property and gives them the legal right to foreclose.

Return on Investment: In 2016, the average return on investment in private equities was 6%, according to Forbes Magazine. Investopedia reports that average 20-year returns on commercial real estate run about 9.5%. Can your project do better?

Service: This is where a lot of beginning investors fall down.  Think of yourself not un-like a publicly traded company and issue periodic reports to keep your investors up to date. Let them know going into the investment the frequency and nature of reporting you intend to provide and then follow through.

Now, let’s talk about commercial real estate in particular.

Do you understand the dynamics of the commercial real estate industry?

While the market as a whole has recovered from the 2008-2009 financial crisis and prices as a whole are 46% higher than the 2007 peak, the recovery has been uneven. [Read More] Here are some of the reasons why.

  • Recent banking regulations, (such as Basel II), have forced banks and other regulated lending institutions to become much more conservative.
  • The recovery has been imbalanced. Major markets have recovered more than small markets. Sector growth has been uneven. Retail property prices have actually fallen by 2% since 2007.The CMBS portion of the commercial mortgage industry has shrunk by more than 60% since its 2007 peak.
  • The CMBS portion of the commercial mortgage industry has shrunk by more than 60% since its 2007 peak.

Do you know how to recognize a good or great investment opportunity in today’s commercial real estate environment?

  • There are still under-performing properties in many markets
  • Over $1 trillion of existing commercial mortgages are due to mature in the next three years with lenders who are unlikely to refinance or extend.
  • The transaction volume is at an all-time high! Commercial property is changing hands.

Perhaps a more important question is:  How can you take advantage of commercial real estate opportunities with little or no cash, credit and credibility?  In order to attract the equity partners and credit partners you need, you must have a professional credibility kit.

Your professional credibility kit should include:

  1. Specific, focused, BUSINESS GOALS outlining your market niche, buying and exit strategies.
  2. A clearly stated purposes expressed as your MISSION & VISION
  3. A UNIQUE SELLING PROPOSITION that makes your business model stand out.
  4. An experienced TEAM that includes brokers, attorneys, property inspectors, other lenders, buyers, professional management and other industry certified professionals.
  5. An INDUSTRY PROFILE that shows you understand the overall commercial real estate sector.
  6. A MARKET ANALYSIS that shows the opportunities you have identified and why they exist.
  7. Your strategy for finding qualified BUYERS/PARTNERS and lenders.

Your professional credibility kit is what sets you apart. It enables you to present yourself as a professional, even if you’ve never done a commercial real estate deal before.  What you are bringing to the table is the ability to assemble a team, identify a property, and leverage other people’s experience, abilities, and money to create stable returns and consistent profits. By creating your own credibility kit, you are demonstrating in advance your ability to perform.

 * * *

For more information about how you can work with a consultant at Sofia Capital Ventures to create your professional credibility kit, call (760) 523-8977 or email us anytime.

By |November 28th, 2017|Private Commercial Lending|Comments Off on New Commercial Investor Credibility
Barbara Leuin, Commercial Lending Expert
Barbara Leuin, Ph.D., Commercial Lending Expert, Carlsbad, CA, is a serial entrepreneur and real estate investor, with over 30 years of professional experience, including 13 years of university teaching in business and economics; 16 years of business consulting; and 5 years as a full-time real estate investor. Since 1996, she has helped start-up businesses access millions in private capital. As CEO, Barbara brings visionary leadership, team-building and leadership to Sofia Capital Ventures. She is responsible for lender relationships, broker training and identifying market opportunities.

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