Why Wholesale Commercial Deals?
Why would a commercial investor consider wholesaling a great commercial deal? Wouldn’t they want to keep it as an investment for themselves? Well, they may have found a great deal, but they might not have the capital to purchase it. Not only may they be short on cash, but they also could be a beginner investor. Wholesaling commercial real estate is a great way for beginners to build up savings to invest in commercial real estate of their own. Using the wholesaling strategy, beginner commercial investors don’t need a down payment or loans, so it’s a terrific way to get started in commercial real estate.
3 Steps to Wholesaling Commercial Real Estate
The commercial wholesaling process can be broken down into 3 steps:
- Generate commercial leads
- Get good deals under contract
- Find buyers and close the deal
1. Generate Leads
Lead generation is a crucial aspect of commercial real estate investing. Investors can learn to talk to sellers, analyze deals, and even utilize creative financing techniques. However, these skills are useless without leads. So, the wholesaling process begins with learning how to connect with commercial property owners by contacting them directly. I have developed multiple strategies for connecting directly with property owners. And these strategies work regardless of what market you are in.
The key to step one is to implement effective lead generating strategies, be tenacious in following up to capitalize on leads, and then build rapport and credibility once you’ve connected with the property owner.
2. Get Good Deals Under Contract
A good deal has three components:
- Priced under market
- Has the potential to increase the NOI
- The Potential for Seller Financing
The ability to increase the NOI is important because as the NOI goes up, the property value goes up. If you can increase the rents or lower expenses, you increase the NOI, forcing the equity and creating value.
Seller financing is also a key component when structuring a good deal. This includes a Master Lease Agreement, seller carry first, or seller carry second. Since creative financing is based on the seller’s motivation, investors need to be a good listener and know the strategies.
There are two essential components to include in a commercial contract when wholesaling commercial real estate:
- Protection of your earnest money deposit.
- Language that allows you to wholesale the deal. This enables you to assign your contract to the next buyer so that you can get paid.
To put a property under contract the buyer is required to put down a small deposit and that money needs to be protected. This is done by including contingency clauses in the contract. Here are 4 earnest money protection clauses for any commercial contract:
Financing Clause – The contract must include a financing clause that allows the buyer to back out of the deal and get their deposit back if they are unsuccessful getting financing.
Inspection Clause – An inspection clause in the contract enables the buyer to get out and get their money back if the inspection fails.
Appraisal Clause – Many commercial contracts miss this, but the contract must include an appraisal clause.
Title Clause – A title clause enables the buyer to back out the deal if there is a lean on the property or something is wrong with the title.
3. Finding Buyers and Closing the Deal
Investors wholesaling commercial property can build a buyers list through online marketing. Just by going online and advertising or marketing your deal, you can build up a buyers list in a very short amount of time. Another avenue is networking. Commercial real estate is a relationship-based business. Deals are made, money is raised, and problems are solved through relationships.
If you want to invest in commercial real estate but don’t have the cash, the solution could be to wholesale under contract deals to qualified buyers for a fee. You don’t need a down payment and there’s no need for loans. Using this strategy, beginners can build up a treasure chest to purchase their own commercial deals.
