Aug 25, 2021
Summary:
Is flipping houses the way to go, or is commercial real estate a
more opportunistic pursuit? Listen to today’s episode to listen to
myself and Mike Sowers discuss some of the benefits in flipping
commercial real estate—and get insider tips on how to do this
effectively. Sowers emphasizes the value in focusing on deals that
add significant value to a property; one must consider what it is
going to be worth to someone who will occupy it, as well as what
comparable properties sell for. Sowers breaks down some of the
strategies for mitigating risk within this industry, and provides
an economical justification for investing in properties such as
office spaces.
Highlights:
-It is possible to get higher returns investing in commercial real
estate?
-Is flipping houses all it’s cracked up to be? It is a great first
step for many investors. However, you don’t have to go into
flipping houses to start—you can go directly into flipping
commercial and skip decades of steps.
-There are a lot of sectors of commercial real estate, which can be
broken into four categories
-Within the categories, there are different niches
-Sowers’ business is interested in deals that will add significant
value to the property
-Only buying properties where you can create value that worth more
than it costed to create the value
-There are two ways to sell/value real estate: what is it going to
be worth to someone who is going to buy/occupy it? What do
comparable properties sell for?
-A financial buyer/tenant values properties differently
-It can be beneficial to buy multi-tenant properties that have
problems (i.e. property/people problems, partnership disputes,
etc.)
-Focus on properties where you can increase the income stream
-Good strategies and system mitigate risk
-Sowers is particularly interested in the suburban office sector,
because it has a much higher perceived risk than real risk
-From a demand standpoint, apartments feel less risky to invest in,
but from an economic standpoint they pose a much higher risk
-How does this play into the work-from-home setting? Some of these
shifts are taking place, but they’re not as extreme as people think
they are. This transition actually makes it a good time to buy
office spaces at lower costs, and still rent them out for a higher
cost.
-There are different incentives you can offer to get people to
decide to lease (i.e. free rent for a small period of time)
-Sowers targets small business owners
-Being able to accurately predict the future value of a property
and estimating the costs to do so are both required to be able to
successfully flip commercial real estate
-The active and passive partners have different roles in the
process and maintain a symbiotic relationship
Useful Links:
Financial Survival Network
Mike's Book
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