Chapter 1

Just Imagine . Commercial Real Estate and You!

IN THIS CHAPTER

Discovering commercial real estate

Figuring out how to get started

Risk-proofing your investment plan

Can you imagine yourself in the world of commercial real estate investing? Imagine yourself walking through the lobby of your 100-unit apartment complex. What would it look like and feel like to be pulling into the parking lot of a neighborhood shopping center that's all yours? Maybe you can imagine that you're watching video footage from your home computer as your customers enter the security gates of your five-acre self-storage facility. What if this project leads to a life of true prosperity and balance? You'd be able to do things such as drive your kids or grandkids to school every day, maybe even in your pajamas, with a big smile on your face because you've invested wisely. Okay, here's one more scenario that may get you excited: Imagine yourself impacting the lives of hundreds or thousands of kids here and around the world who benefit from your charities, all funded by wealth-building skills and invaluable relationships developed from your commercial real estate investing. Investing in commercial real estate can be the key that allows you to turn these fantasies into your reality.

Creating the wealth that allows you to follow your real passion is what's waiting for you whether you're an investor, real estate agent, or lender. Commercial real estate will accelerate your financial freedom. The best part is once you get to where you're not worrying about money anymore, you'll get to expand and explore other parts of your life besides making money. We call this other part of your life your "burning why." What do you want to do, be, or create? Who do you want to help? How are you going to make a difference? That alone makes this book worth diving into.

In this chapter we'll jump right in and provide an overview that gives you a better understanding of what commercial real estate investing is. We'll show you the different types of investors so that you know what your options are. If part of you is wondering if you can really do this, you'll find the answer to that question right here in this first chapter. (We think you probably can!) Dealing with numbers, types of properties you can invest in, and an overview of how financing works is all coming up in just a few pages. Finally, we'll provide a summary of the risks involved with commercial real estate. Is it all worth it? We obviously think so, but also know that you'll make up your own mind as you read through this chapter (and perhaps the rest of the book).

Defining Commercial Real Estate

Commercial real estate is many things. It's office buildings, apartment complexes, shopping centers, warehouses, industrial parks, hotels, motels, resorts, and the list goes on and on. It's where businesses are conducted and where many people live together. Commercial real estate is everywhere. (Jump to Chapter 2 for a journey through all the different types of commercial real estate that are available.)

Commercial real estate is also a means of building long-lasting wealth for the investor. To us, long-lasting wealth is an investment that pays you every month. It's also one in which the value increases every year. Compare this to other types of investments such as stocks where if you draw a monthly payment, you have to be careful the balance doesn't go down year by year until the pot's empty. That's not true wealth at all. In this book, we show you how commercial real estate has the ability to generate sizable cash flow every month as well as increase in value every year (and to be tax free!). We challenge anyone to find a better way out of the rat race than to invest in commercial real estate.

Commercial real estate can afford you a wonderful and fulfilling professional career that's second to none. And besides being enjoyable, commercial real estate investors are among the highest paid professionals in the nation. In fact, it isn't uncommon for a commercial investor's check from just one closing to equal an engineer's annual salary. Many of our mentoring clients have joined "The Quitters Club" by saying goodbye to their 9 to 5 jobs.

Every ultra-successful investor or high-income-generating professional we know in this business knows the secret - it's relationships. Commercial real estate is at its core a relationship business. For instance, big deals, huge fees, and long-lasting and fulfilling careers can all be created through the relationships you make. We talk more about relationships in Chapter 10.

As you're out and about, start looking around at all the commercial real estate that you see. When you go to the shopping center, notice what space is leased out. What buildings aren't fully leased? Why might that property be having trouble? After you realize that an investor owns every building, it's difficult to not think about owning your own commercial properties someday.

Getting Started

When choosing to make an investment in anything, you have to take several things into consideration. You consider your reasoning or motivation for investing, the cost, and the timing. Well, the same applies for commercial real estate. In fact, you may find that you have too many choices simply because there are so many different ways to profit in this field. The following sections go over some of the most common questions you may have when deciding which part of commercial real estate is right for you.

Making money with commercial real estate investing

We know that you can make money investing in commercial real estate for three reasons:

• If we can do it, you certainly can, too. Both of us started from modest beginnings, and we aren't special by any means. In fact, coauthor Peter Conti used to be an auto mechanic. Coauthor Peter Harris was an introverted engineer.
• We are blessed to be surrounded by our Commercial Mentoring Program students who for the most part have started with little or no experience in commercial real estate. Every time a Mentorship student gets another deal, they prove that it really is possible.
• If you look at the most successful investors out there, you'll find that they all have a pattern in common: They've typically started out by investing in homes, running a business, or working in a fairly well-paying profession. The next step is to begin investing in smaller commercial properties, such as apartment buildings. At some point the successful investors all move up to either big commercial deals or land development.

Coauthor Peter Harris started out investing in real estate by purchasing single-family homes. He did quite well in it, but one day he was daydreaming and said to himself, "What if I could combine all my rental homes under one roof?" He felt that would make managing the properties a lot easier because he wouldn't have to drive around the city chasing rents. In fact, he realized that he could make better use of the time that he saved by investing even more! When he woke up from his daydream, he realized that he had just described an apartment complex. To make a long story short, he sold all of his rental homes and bought large apartment complexes. And the rest is history. His cash flow went from hundreds per month to thousands per month in only two years.

If he can make it starting out where he did as an introverted engineer, and now he's buying commercial properties worth millions, you certainly can, too. You see, Peter is simply an average person who applied the ideas in this book to change his life. If he can do it, anyone can use commercial real estate investing to transform their life.

Co-author Peter Conti was working as an auto mechanic when he first got started investing in commercial real estate. He tells his clients that he was "scared to death" when he bought his first property - a small duplex. Peter Conti used the same ideas you'll be learning about in this book to go from mechanic to millionaire in just three and a half years, and he started out with just $1,500 in the bank! If the Peters who wrote this book can do it, anyone can use commercial real estate investing to transform their life.

Throughout this book, we show you what "good real estate" looks like, and we tell you how to time the real estate market, what markets to stay away from, and how to know a good deal from a bad deal. Then we set you up with some powerful guiding principles of investment to help you move forward.

Categorizing investors

You can fall into one of two basic types of commercial real estate investors. The first is the cash-flow investor, and the second is the long-term hold investor. Both make excellent cases for fantastic wealth building, and both can do well in an up or down market.

Cash-flow investor

Cash-flow investors purchase properties for the purpose of putting monthly income into their pockets. And they buy commercial real estate just like you would buy a business. In other words, if you were buying a ready-made business, you would do whatever it takes to make sure that the business is a proven moneymaker, right? You would thoroughly check the financial records to prove that it could stand on its own every month. Well, cash-flow investors...