How To Get Started in Commercial Real Estate Series: Tip #5 How to Finance Your Commercial Real Estate Ventures

You're listening to Commercial Real Estate Secrets. In these first 10 episodes, I am doing my top 10 tips to get started in commercial real estate. My name's Aviva, and as the leading internet personality about commercial real estate, I have made it my life's mission to teach people like you and me who maybe were not able to create wealth in commercial real estate prior internet about it. We talk about the strategies and techniques for you to build your foundation of wealth for yourself and your family in commercial real estate. Now I was doing a deal a couple of years ago and I engaged this, uh, loan officer who I'd worked with in the past. She was amazing to work with.

And we get through the deal and ultimately...

We couldn't finance the deal. And as a result, I lost $30,000. It was brutal. They say you don't pay for an education in real estate. You do. You just pay for it in different ways. And that was a year of college. So I called the loan officer after the whole deal had fallen through. And I said, what went wrong? And she said, we're a couple.

Aviva (01:59.25)

credit union, our rules are more strict. You should have gone to a bank. You would have been able to finance it. And I looked at her and I said, why didn't you tell me that? And she said, I wanted to try. Which is, I could say a bunch of curse words, that's not necessary, but the point that I'm making is, don't use credit unions to fund your deals.

And it's just really important to know how to get money, the optimal way to get money and who you're working with when you're doing deals in commercial real estate. I also should have had a backup lender. That was my fault.

Aviva (02:48.23)

What does me losing $30,000 in commercial real estate do for you? Well, first off, you're definitely not going to use a credit union to fund a deal. If one person doesn't use a credit union to fund a deal, this will be not in vain. But you know, I hear all the time, I don't have enough money to buy commercial real estate. I get the comment daily on my socials. I don't have a million dollars.

commercial real estate. And as a result, if you have this mindset, you're not investing. You're not working towards investing because you've already stopped so far. Go back to my tip number 10 mindset. You think you can't do it, you will not do it.

but you're here and you know you can and you know there's a way and you're educating yourself. Here's what you're gonna do. Look, there are many ways to fund a commercial real estate endeavor. And there are a lot of different ways to create an economy that will in turn pay you, maybe pay your lender,

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I'm going to talk about my two biggest ways to fund a commercial real estate deal. I'm going to give you a third one that's really interesting that I'm seeing a lot more now. Tip number one, traditional financing through a bank. You buy a property, you take out a loan, the tenant pays your expenses and your mortgage over time.

Aviva (04:39.11)

And after 20, 30 years, you own the property Mazel Tov. Leverage can be really good. It can also be really dangerous. You need to be smart about it. Leverage is debt. Another way that you can fund a commercial real estate endeavor is through OPM, other people's money. This is a really successful way that I see people buying commercial real estate. They find a property.

They gather friends and family, they write up a partnership agreement, and they buy the property in cash. You could also use other people's money to buy a property and finance it. The thing is, is when you buy a property in cash, you become bulletproof. Why?

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in place and a loan and the tenant fails and I don't have enough money in the reserve account, the bank could foreclose on the property and take it back. Now you've lost all your money or your partner's money. Whereas if you buy a property in cash and your tenant fails and you are responsible for the payments, you know, your taxes and insurance while you find a new tenant,

Taxes and insurance are going to be significantly less of a burden than mortgage payments, right? Of course, you know, you could still lose the property by not paying the taxes, but that's, it is way easier to cash call or fundraise or save in your reserve for taxes as opposed to the entire mortgage payment.

Look, here's another crazy thing about raising other people's money way faster than financing through a bank.

If you do a commercial real estate investment in cash, which you can do by raising other people's money, you're ironclad. And what people don't realize is that you can create a really...

fruitful garden economy portfolio of your own by syndicating deals. I've seen people turn themselves into millionaires this way. You find the right deal. You get it under contract. You raise the money from friends and family. And then, you know, you go by rule number one, you never do a dumb deal. Rule number two, you never do wrong by your partners.

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manage that property. So for syndicating, you're going to get a syndication fee, industry standard. Then you're going to manage the property. So you get paid monthly for the property management, also industry standard. And then you're going to be paid for your leasing commission and renewals, also industry standard. And what that does by you syndicating

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foundation that we've been talking about of true wealth and success over time in commercial real estate. Remember never forget our rules of thumb. Never do a dumb deal. Never screw your partners.

now.

What questions do you have about financing in commercial real estate? Head over to my Instagram, DM me at Aviva Real Estate. If you want to get my free guide below, head to the show notes, how to get started in commercial real estate. And next episode, we are talking about tip number four.

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online because I always get the question, how the hell do I search for this? We'll see y'all next week.