2.

Build Your Team of Professionals

It's been said that your network is your net worth,

and that couldn't be more true than in the world of commercial real estate.

Your network of professional consultants is one of the most valuable assets that you can have,

as they will guide you throughout the entire deal process.

Whether you need to redevelop a site, renovate a building,

lease up existing space, or even go through an entire rezoning process,

your network of consultants can simultaneously save you from disaster

and exponentially increase your returns.

It's nearly impossible for you to have the knowledge to do every single aspect of the deal.

I like to refer to developers as the conductor of the orchestra.

You don't necessarily have to know how to play each instrument expertly,

you just need to know how they all work together to create the music.

So, what kinds of consultants should you have?

Here's a list of the most common groups you'll be working with.

Property Manager

Having an outstanding property manager on your side can make

all the difference when you're investing in commercial real estate.

I highly recommend keeping a property management fee in your underwriting

regardless of whether or not you intend to hire a property management company.

You never know what could happen, and if the deal doesn't work with a property management fee,

it probably doesn't work at all.

If for whatever reason you get incapacitated or move away

and can no longer manage the property yourself,

you don't want to get forced into an untimely sale.

Management companies can run the day-to-day for you and allow you to invest

well beyond your geographic reach.

Property managers will be able to walk through the property with you

and assist you during your due diligence just like a contractor would.

They can help, along with your broker, point out the pros and cons for tenants

and any issues that may arise during your acquisition of the property.

General Contractor
Your general contractor should be able to help you navigate the labyrinth of permitting

building and or renovations, timelines, subcontractors, and more.

If you have a question about anything from flooring to the mechanical systems of the property,

your GC should be able to give you an answer or find someone who can.

I've included a handout in this course for questions when hiring a general contractor

and a bonus video as well so that you know how to approach this process properly.

You definitely don't want a residential contractor on board,

since the buildings are very different.

And let's be honest, there are some unskilled, shady contractors out there too,

so be very careful when you're going through that hiring process.

Commercial Real Estate Broker

Get on a broker's email list and review every email they send.

Underwrite and tour every property that closely fits your criteria.

The more face time you can spend with a broker, the better,

since you'll become top of mind for them when they run across any investment opportunities.

But most importantly, have conversations with the brokers about the properties.

Why do they like the site?

What are the drawbacks?

What is their anticipated OPEX?

Brokers want to bring you deals, and they can of course help with comps,

that will be successful so that they can continue selling you properties in the future.

The better they know your criteria, the better they can dial in that search for you.

I would also recommend dialing in that criteria as much as you can on the front end.

My brokerage team deals with investors all the time,

and the investors that see the most deals from them

are the ones that are incredibly specific about what they want.

Now, I know, it seems counterintuitive, but telling your brokers I'd like to see

anything in the $2 million to $3 million range is far more difficult to work with

than I'd like to see multi-tenant shopping centers within a 10-mile radius of downtown Nashville,

anchored by a grocery store, in the $5 million to $6 million range.

A Commercial Real Estate Attorney

Hiring an attorney that specializes in commercial real estate is an absolute must in my mind.
Not only do commercial real estate attorneys review and negotiate

purchase and sale agreements on your behalf,

but they also check to make sure the property doesn't have any zoning restrictions,

land use issues, environmental concerns, and negotiate your loan agreements.

Having the right attorney on board with your best legal interests in mind

can be the difference between a smooth deal where you're protected and a foreclosure.

Money is one of the main reasons you're doing commercial real estate investing, right?

Finding a good real estate accountant can sometimes be the difference between profit and loss

in the early stages especially, and sometimes even between millions and

tens of millions in savings depending on how big your deals are.

Their function within your deal is priceless, although you'll probably negotiate a good rate.

And their responsibilities can include

Impeccable recordkeeping throughout the deal

Making sure you're meeting and exceeding tax requirements and keeping up with regulations

Don't mess with the IRS

Researching and suggesting as many leverage points as possible regarding tax benefits

Again, stay out of the tax code and regulations. Never try to pull anything out of bounds here.

On the flip side, there are a ton of tax advantages

waiting for you in commercial real estate, and your accountant will help you find them.

My accountant even helps with our cost segregation studies that end up providing

us with an immense amount of depreciation to help shelter active income.

One of my good friends regularly makes 7 figures a year,

but because their accounting is in line and they depreciate their assets,

they pay little to nothing in taxes every year.

Think about the other properties you could buy with all those savings,

or the vacations, or whatever else you want to do with that money.

Bottom line, find a great real estate accountant and pay them well.

A Mentor or Advisor

Potentially the most important person in your network, your mentor and or general advisor

should have years, preferably decades, of experience under his or her belt.

This is a person who has seen and done it all, someone who isn't spooked by anything that comes

up, and can advise you at every point you need it throughout the process.
Your mentor can also be invaluable in filling out the rest of your consultant network with

competent professionals since they've likely curated this list over the years.

I wouldn't just stop at a single individual. I have advisors for multifamily, self-storage,

industrial, brokerage, property management, you name it.

Every aspect of the business is different, so I lean on my counterparts that have

far more experience in those realms whenever I have questions.

An Engineer

Before you take control of a property, it's better to have a complete picture of your new space,

and that includes the civil, environmental, mechanical, and structural aspects.

Sure, knowing the building, if the property isn't vacant, is very important, but at this point in

the game, the engineered components can determine whether or not you should move forward.

You may want to have a survey shot, perform a phase 1 environmental,

test the soils with a geotech, engage a civil engineer to review the site,

engage mechanical engineers to review your mechanical load,

and so much more will cover more in the due diligence process.

Not every property will need each of these inspections,

so it's important to know when to take the next step.

I acquired a site a few years ago that was structurally sound when we closed.

However, after a spring full of heavy rain,

the hydrostatic pressure built up way too much behind the retaining wall,

which caused it to begin separating from the building.

Fortunately, it didn't break the deal, because we had an experienced group out

there to review it and tell us how to fix it as soon as we noticed the issue,

but that could have been far worse.

An Architect or Space Planner

In a new build or intensive remodel,

the architect is usually considered the overall boss of the design process.

They design the building, but not only for aesthetic beauty and usable function,

their plans are also responsible for the ultimate integrity and safety of the building.

Good architects who specialize in commercial real estate projects are

easy to find in any major market, but remember, you need to place the finding

of your architect high on your list as everything in the project will flow from their pen.
Get Your Architect Early

Each firm has its own design flair, so you may not use the same architect for

every project in order to create variability within your deliveries.

In fact, if your project is large enough, it's not uncommon to have

multiple architects working on different buildings or aspects of the site.

Lenders

Research and meet with multiple lenders at multiple banks to find the right terms for your deal.

Never forget that there are nearly endless lending institutions out there.

If one doesn't seem right from either side of the table, get up, walk out, get back on the phone.

I once went through over 50 lenders on a single project to find the right fit.

Was it enjoyable? Absolutely not.

But we had to find the right fit for financing this somewhat unique asset.

And we did.

Every bank has different lending criteria and buckets for property types, so the lender that

financed your last office building may not be able to lend you money on your next office building if

that bucket happens to be full. It always helps to have multiple relationships.

I also recommend working with smaller, local, and regional lenders for your project.

They tend to better understand the area, don't have as much red tape,

and may also be able to offer better terms than larger lending institutions.

Once chosen, you'll meet your banker or lending partner many times throughout the purchase process,

but it is absolutely essential to do so early on.

Because you need to know if your lending partners are truly interested in lending on the deal.

Not only that, but you need to build a good working relationship with your lender because

they're going to be the one that will go to bat for you at loan committee.

Get your lender on the phone and throw out a high-level,

hey, this is what we're paying, this is our plan, here's what we project in rent,

type of conversation. Just to get a quick yes or no.

This action alone could save you days or even weeks on the back end of a deal.

Similar to partnering with a more traditional bank lender,

if you don't possess all of the capital you'll need to complete the deal yourself,

if you just want to limit your overall exposure into any single deal,

you can raise capital from third-party investors.

with two or three interested and qualified friends, all the way up to engaging a private

equity firm, or what I would consider to be one of the best ways to invest,

commercial real estate syndications, which can be the best way to truly scale your

real estate investing if done correctly. We'll get into those later.

Bottom line, your funding might already exist in your current network of friends,

family, and acquaintances, so get out there and start talking to them about your deal.

They may be waiting for an unforeseen investment opportunity, just like yours.