Real estate is a field with myriad players. They perform a number of services, many of which will be essential to your success. Most operate at the local level. At the same time that you are becoming knowledgeable about your local markets, therefore, you should be cultivating relationships and building your own reputation. At all points in your career, you need help from others, but this is especially crucial when you’re starting out.
In particular, brokers are a wonderful source of information. It is not easy to find the right ones—that is, those who will spend time with you, and show you their best listings in a timely way. It often depends on the broker. As in every field, there are good brokers and bad ones. Keep in mind that 1) they are being paid by the seller, and 2) they only get paid if the deal goes through. Obviously, then, you have to assess how much weight you should put on their advice. But the better brokers take a longer-term view, hoping to build long-term relationships. After all, they might someday be selling a building for you.
Most brokers specialize in particular property types or markets. You need to find out which brokers fit your needs. Not surprisingly, brokers spend more time with their repeat customers. The problem for most of us starting out is that we’re not (yet) repeat customers, nor are we flush with cash, nor are we blessed with ready access to credit. The broker has to look past those limitations and see our potential.
One sensible question to ask and answer is this: Do you pick a broker based on the individual’s reputation, track record, and willingness to show you around, or on the reputation of the firm with which the broker is affiliated? Personally, I go for the individual—and that’s pretty much my rule of thumb in all aspects of real estate. If your people judgment is good, picking someone with time to spend who, like you, is just starting out may be a good compromise (at least for most simple transactions).
If you are buying a house, you can turn up a great deal of information online, including specific properties for sale. But because each commercial property is different, and because many property owners desire confidentiality for various reasons, few investment properties are listed this way. Nevertheless, you can often uncover a great deal of general market information online, as well as information about nearby buildings. Comparative real estate tax assessments can be a good starting point. Sale prices are generally public information, although you should keep in mind that a stated price may have been affected by the terms of the transaction. If the seller took back a mortgage at an interest rate favorable to the buyer, for example, that might have led to a higher-than-normal sales price.
Although the transparency of information in the real estate industry is gradually improving, much of that improvement shows up in the single-family home market and—at the other end of the spectrum—properties that are large enough to be attractive to institutional investors. These larger properties are rarely the right fit for those just starting out. Smaller properties will simply require more detective work.
After you’ve found a promising prospect, be prepared to do a detailed inspection and analysis before you sign a binding purchase and sales (P&S) agreement. If you’ve purchased a home, you’re familiar with the basics here. But most likely, as the stakes are higher and the buildings more complex in a commercial transaction, a higher level of diligence is in order. Make sure you have adequate time between the signing of your P&S agreement and the closing date to arrange for your financing. (Your lender needs processing time.) In some cases, you might make your offer contingent on your obtaining that financing. This may be a negative to the seller, but it is something to consider.
At this stage of your career, if you do not have much cash, you may attempt to limit the amount of your deposit. The seller may take the opposite view, looking at the size of your deposit as evidence of your commitment to the deal. Be careful how you negotiate, especially in a competitive market. The amount of deposit you’re willing to put down may determine whether you get the deal.