So you’ve bought your first commercial real estate investment property, and things are going well… so well that you’re ready to get started on your next one.
But before you gear up to purchase another property, keep in mind that while scaling your income property portfolio is essential if you want to achieve financial freedom, you don’t want to end up with a job that eats up all your weeknights, weekends, and holidays.
There’s a secret to scaling your real estate investments successfully, and it’s one that has less to do with how much you know, and everything to do with being able to scale your business effectively.
It’s as simple as following three key rules that will help you succeed in commercial real estate and grow wealth over the long-term.
Create A System That Can Be Duplicated
Most investors overlook systems because they seem boring. They lack the excitement of discovering a great deal, or bargaining with a seller in order to score a great property.
And particularly when you’re in the midst of a dozen different tasks you need to accomplish before the day is up, creating systems that allow you to run your business more effectively is usually the last thing on your mind.
However, there are several benefits to creating and implementing systems in your commercial real estate business.
One benefit is the number of scalability systems give your business. Not only do they make it easier to expand into other niches or locations, but they decrease the amount of time it takes you to investigate, acquire, and manage properties.
The founder of McDonald’s understood this right from the beginning. Whether you like their food or not, McDonald’s has established systems and procedures that have allowed them to expand to thousands of franchises all over the world. And although you might not be up to the stage of building an investment empire around the world, systems will still help you expand your influence and your portfolio, even if it’s just in your own city.
Another benefit to having established systems in place is the consistency you gain when a crisis occurs. Instead of reacting emotionally and most likely making things worse, a system ensures you’re able to make a calm decision consistent with your investment goals. Even more importantly, a good system can sometimes help you salvage a situation that would otherwise have been a lost cause.
Get Together A Team Of Experienced Professionals
While you might think experienced investors prefer to handle everything on their own, the truth is that any investor worth his salt has a team of professionals he can rely on. A strong team helps you leverage your real estate business and gives you others you can turn to for advice and suggestions when you’re unsure of how to handle a particular situation.
You should have a lawyer, accountant, and contractor on your team as a minimum, along with a broker and a mentor.
A good commercial real estate broker has an extensive list of contacts that he can tap into when you’re looking to buy or sell a property. Most of the best properties never make onto the public websites, since many sellers prefer to work with those they know. That doesn’t mean it’s impossible to find a good property on your own, but it does mean that you might spend unnecessary time and energy searching for a lower quality deal.
A broker’s fee is a small price to pay (though only sellers need to pay a fee) for a prime property that will likely net you tens of thousands of dollars over the years.
A mentor is also someone most beginning commercial real estate investors don’t think of hiring. Forget about those gurus trying to sell you another online course: an effective mentor should still be involved in commercial real estate and have at least ten years of experience in the field.
Having said that, you should be willing to pay your mentor in order to gain access to them. Although you might be able to ask a question or two, if you really want to grow and learn as an investor you’ll need someone who can devote an hour or so of their time to you on a regular basis, and who won’t hesitate to call you out when you stray.
There’s no need to reinvent the wheel: most of the mistakes newer investors make are foreseeable and preventable. You can cut your learning curve in half and come out ahead of the game by spending just a few hours a month with a mentor, so you should do whatever you can to add a mentor you can trust to your team.
Here’s How To Acquire The Cash You Need To Purchase More Commercial Real Estate Properties
Most investors have already figured out how many rentals they’ll need to hit their financial and retirement goals. The problem is that once you’ve bought your first property – usually financed by loans from friends and family – it can be hard to find the funds to invest in a second.
Even if you do manage to finance the second property if you’re not careful your debt to income ratio can end up being so that you won’t be left with any cash for renovations.
So what can you do to add to your portfolio without exhausting all of your resources?
The answer is actually simpler than you think: use private lenders or partners to help you fund your next deal. It’s actually nothing to be ashamed of, as the cost of commercial properties means that unless you’re a Fortune 500 owner, you’ll probably need someone else’s cash to help you do more deals.
Although finding private lenders or partners might take some sleuthing (here’s where your real estate team comes in handy), making the case for a particular deal isn’t as hard as you think. You’ve already done one deal, and although that doesn’t mean you’re an old hand at it, most people will be willing to hear you out if you can show that you might have a good deal.
And since you’ve already done one deal, you should have enough experience to present the property. If it looks good, they might just jump on the opportunity.
Don’t be discouraged if they don’t, however. They could already have a similar project in the pipes or already have several similar investments. Thank them for their time, and go on to the next person on your list. If it is a good property and the numbers look good, you will find a lender sooner rather than later.
Building a successful commercial real estate business takes time; it won’t happen overnight. It takes patience to follow through and do what needs to be done, but if you do, it is quite scalable and ultimately one of the most well-known ways of growing wealth.