Many investors see an opportunity in the commercial real estate (CRE) market where there are no viable properties listed in the area. Just because there are no feasible CREs listed does not mean that you cannot pursue those off the market, but it does require some assistance and a strategic guide.
A strategic guide to locating off-market commercial real estate deals is a step-by-step method to acquire commercial property not listed for sale. The guide provides brokers and investors with a strategy to find and convince CRE owners to sell their commercial property.
Finding and convincing off-market commercial real estate owners to sell is no easy task and involves many factors. A guide is essential to ensure that you follow the necessary steps and consider everything, including how to identify, value, and approach an off-market CRE deal.
How To Find Off-Market Commercial Real Estate
Finding off-market real estate is no easy task and requires a special touch by some well-informed, highly skilled professionals. Commercial real estate not listed for sale but sought after by buyers or investors is one of the oldest brokering methods in the real estate industry.
Sometimes, investors seek a specific commercial property with certain requirements like location, size, structure, design, revenue potential, etc. Often, these requirements are available on commercial property listings, but if such a property is not listed, help from experts in the field is needed.
Here is a guide to find off-market CRE:
Hire A Reliable Commercial Real Estate Broker
Commercial real estate brokers play a vital role, especially when finding real estate not listed on the sales market. Hiring a reliable CRE broker gives you access to off-market property through their connections, special tools, and resources.
A broker is rewarded once a deal is struck between a buyer and seller, which incentivizes them to work tirelessly to find you close to or exactly what you want, even if it’s not listed. Sourcing off-market CRE requires finesse, dedication, persistence, and a seasoned, reliable broker.
Good communication between you and your broker will keep them hunting until they find the right commercial property that fits your requirements. Ensure you are open about the specific CRE you want to buy to avoid unnecessary effort from your broker.
Create Strong Industry Connections
Advancing your connections in the CRE industry is beneficial, especially when sourcing off-market commercial property. Brokers have a good repoll with contractors, property managers, title companies, and environmental and legal teams to keep them informed of CRE potentially becoming available.
Keeping your ear to the ground and staying connected in the industry is a great way to get inside information to help broker a deal on a CRE not currently on the market. All it takes is one conversation with the right person at the right time to open an opportunity you can forward to your broker to investigate.
Market By Direct Mail
Commercial real estate owners are skeptical when they are approached by buyers, especially when a reliable and well-known broker is not involved. One of the best ways for a CRE investor to promote confidence and establish a target audience is via direct mail marketing.
Direct mail marketing is a great tool for novice and experienced investors to get their name out in the CRE industry. Even if a property is not for sale, having your name in the market will inspire confidence when a commercial property owner decides to sell. Often, CRE owners who never thought of selling change their minds after receiving a well-crafted mail from a potential investor.
Buy From Wholesalers, Auctions, And Foreclosures
Sometimes, commercial real estate owners are overcome by unforeseen circumstances or other complications resulting in foreclosure. Many CREs end up on auction, opening an opportunity for investors to swoop in and make a good deal. Buying commercial real estate foreclosed on, auctioned, or wholesaled is dicey and requires extreme caution and due diligence.
Drive For Off-Market Deals
Driving around searching for off-market commercial real estate is one of the less favored options and requires a lot of driving and knocking on doors. Driving for off-market CREs is unpopular because often the investor lives out of state or does not know the area.
The upside to finding off-market real estate by driving and knocking on doors is that you get a feel for the area and an opportunity to meet the owner while physically viewing the property. The challenge is to be confident, well-spoken, and prepared because often, the owner did not consider selling until hearing your proposal.
Here are clues to look for when you are driving around looking for an off-market CRE:
- Overgrown property
- Damaged structures
- Boarded windows
- Poorly maintained properties
When meeting with the owner, show compassion because some of these commercial real estates are generational and require some finesse. Share your idea to entice the owner to sell, but not too much that you oversell, causing the owner to keep the property and use your strategy.
Estimate The Property’s Worth
When a commercial property is listed, it is accompanied by a proper valuation. Off-market commercial real estate does not provide a valuation and requires some expertise and knowledge. Determining the value of the CRE is essential to provide you with an estimated offer value.
Acquiring the assistance of a reliable appraiser, especially one who knows the area, is a good idea. A local appraiser can use similar properties in the area to give a ballpark value of the property. The county Tax Assessor’s office holds the value records of all previously assessed CRE properties. These records are a good way to get an estimated property value and help you consider it a viable option.
Identify The Owner
One of the most difficult things about off-market real estate is getting your foot in the door, and for that, you will need to identify the owner. Finding the owner is sometimes challenging, especially if he/she lives out of state or abroad. Here are ways to identify the owner of an off-market commercial real estate:
- Search Multiple Listing Services
- Inquire at the county Tax Assessors office
- Property tax records
- Inquire from neighboring CRE property owners
Using any of the above methods to identify the owner of the off-market CRE requires the property’s address or the plat, block/lot number of the property.
Make A Proposal
After identifying the owner, estimating the property’s value, and considering all the factors, it is time to make an offer. Here are four ways to approach the owner of an off-market CRE with a proposal:
- A letter of intent through the mail or email.
- Through a broker.
- By phone.
- Personal visit.
Your best chance of success is using a reliable and seasoned expert to broker the deal or to personally meet and discuss the proposal. A face-to-face generally produces the best results. If you decide to do it yourself, ensure you have all the information necessary to promote competence and trust.
Conclusion
Off-market commercial real estate deals happen regularly, and many investors prefer going after them, especially if they show potential. Acquiring CRE not on the market is challenging and requires expertise from a reliable broker or a studied strategy from an investor. Following a well-established guide will enhance your chance of success when pursuing off-market commercial real estate.