What Type of Commercial Real Estate Buyer Are You?

Dec 22, 2015

Buying a commercial income property for the first time is a momentous, and often frightening experience.

That’s because no matter how much information you’ve gathered about the property, or how many people you’ve asked to give input or advice, you can never be completely sure how the transaction will pan out.

Because of the pressure involved, many commercial real estate buyers fall back on certain life-long behaviors that may have served them fine until now and that is devastating for someone interested in seriously investing in commercial real estate investment properties.

In order to be a successful real estate investor, you need to be aware of the factors that influence how, when, and what you buy. Once you know what these factors are, you need to create a process by which you’ll evaluate properties, so that you can clearly and efficiently make a decision in a reasonable amount of time, based on the facts – not hopes – before you.

Read on in order to find out if you’re one of these buyers.

The Intuitive Buyer

This commercial real estate buyer relies on feelings and emotions in order to make a purchase.

Although they will use logic in order to justify their decision – and it may seem as if the proofs they bring are the result of a reasoned decision- the reasons they may give for buying the property are ones they’ve come up with after they’ve already made a decision.

On the pro side, sometimes buyers relying on intuition alone have either stepped into very big deals which were missed by others or avoided a transaction that appeared to be winners but was duds in disguise.

Don’t fool yourself into automatically assuming that you have psychic insight that allows you to judge a property within a minute or less.

Research has found that although intuition may seem instantaneous, it’s actually a series of analyses that take place so quickly, the person isn’t even aware of.

This brings us to the con side of being an intuitive buyer.

In this case, the buyer makes a choice because they love the area, they get along well with the owner, or they’re sure, without having analyzed the property itself, that this property will be successful since it’s in the X market, which is hot right now.

This attitude can cost you tens of thousands of dollars, especially if you buy a low-performing property but can’t bear to sell it because “it’s bound to bounce back,” or because you don’t like giving up on the property (hint- a property is not a person. It will get over it).


The Analytical Buyer

The other type of commercial real estate buyer is the polar opposite.
Basing his decisions on logic alone, he is able to analyze the property without emotions clouding his judgment. He is good at taking all of the small, seemingly endless facts and numbers, and put them together to see the larger picture.

Furthermore, they often enjoy figuring out all the different aspects of the deal, both positive and negative. They find it easy to compare the present deal with other deals they’ve seen or done in the past, and are able to use their experience and their book knowledge to evaluate a property.

On the other hand, it can be easy for the analytical buyer to get so caught up in analyzing a deal, that he is unable to make a decision. Similar to a computer that freezes up because it’s running too many programs at once, analytical buyers might find it hard to make a decision about buying a property, because there is no black and white line whereupon a buyer can definitely know that a property will be successful.

Instead of taking a leap of faith after having given it their best effort, this type of buyer either spends so much time analyzing that they never get to the purchase, or they turn down the deal based on some far-out scenario that has a 0.03 percent chance of occurring.


What To Do?

So you’ve found out that you’re one of the buyers above. What do you do?

First of all, don’t despair: there is a positive side to every negative side.


Second: establish a system that you can use to evaluate commercial income property deals. Whether that includes checklists, or a length of time which you’ll automatically wait before making any decisions, as long as you use it regularly, it will help you overcome the cons of your buyer personality.

Third: join a mastermind group, or find a mentor. Both can serve as a checks and balances, preventing you from making a costly decision.


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