The #1 Best Way To Not Lose Money On Your First Commercial Real Estate Deal

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This week's Listener of the Week is Cam Poter. Cam, send us your mailing address. And for all of you listening, if you leave us a five star review below, you might be next week's Listener of the Week. Now, I talk to y'all a lot on the internet and there is a glaring question issue need from y'all about buying commercial real estate. And the question goes,

How do I do my very first deal without losing any money? I've noticed there's a lot of fear around losing money in your first deal. And so, let's get into it. You went under contract on a warehouse a couple years ago and I went into the county assessor office. The county assessor is essentially the local government for the county.

where they have all the information about all the properties. And I went up to the zoning department and I got this document called the zoning verification document, which I use to learn the zoning and any potential changes on any property that I'm about to buy, okay? So I do my zoning verification for this property and upon getting that document back, I learned that this property is under

a zoning change that is coming that is going to severely impact the income on the property. It was going to deplete it. It was going to make it like a three cap. There's no point of buying property at 3%. The deal died. Had we not done our due diligence process, had we not done what I'm about to tell you later in this episode, we would have bought a property and lost money on it.

So here we're going to dive into what you need to do in order to not lose money on your first deal. Now it is intimidating to buy property, right? You generally don't buy anything more expensive. And with such big price tags comes the element of fear, right? And fear is really.

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useless crippling emotion that leads people to inactivity and This is normal. This is human behavior however, I Really want you to look fear in the eye and not let it take away from your future of Generational wealth creating legacy creating community the reason why you're here

listening to commercial real estate secrets is because you have an interest and you wanna learn. You don't want fear to kill your dreams of financial freedom and hanging out with me on the beach in the Cayman Islands in 30 years. So, how do we get over the fear of buying your first asset? Well, that's through education, right? So,

The very first thing when you're buying a property that you need to do is your due diligence. What is due diligence? Due diligence is a process that's negotiated into your real estate contract. The timeframe is negotiable, but your due diligence period is the time where you as the buyer have the opportunity before you buy or before your earnest money goes hard

to learn every single thing about the property, top to bottom, head to toe, and every number down to the penny. So my due diligence process is very, very intensive. In the membership, I give you my due diligence sheet, which is every single thing I do in order to see the proper due diligence through. Here are a few high level.

things on my due diligence list that we have to get through or else this deal is not. First and foremost, you gotta run the numbers. You need to know the income and expenses on the property. And you need to verify these yourself by another way other than the owner or the broker. So what does that mean? That means you go under contract and the landlord says, we make X, Y, and Z.

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from each of these tenants, and the income on this building is B. Well, what you do in order to protect yourself because the landlord could be lying, is you do estoppels, tenant estoppels. Tenant estoppels are a legally binding document where the tenant, once you're under contract, the tenant tells the next owner how much rent they're paying. So, of course,

Technically a tenant could lie in this situation, but there's wording on the estoppel agreement saying that there are legal repercussions. The point of the estoppels is to actually verify how much money the tenants are paying. And the same thing can go with expenses. You can verify taxes, that's public record, on your county assessor's office. You can verify the water bill. You can call Xcel Energy and get a...

range of how much your gas and electric are going to be. Instead of going to the landlord to get the numbers, you go to the source, okay? This is how you verify your numbers during your due diligence process. The second thing in due diligence is zoning verification. Nobody talks about this. But when you buy a property and you're buying an industrial property as an income property for industrial uses,

you wanna make sure that the zoning on that property is industrial and staying industrial. Because if there's a change, you are finding yourself in a world of trouble. I know a group that just bought, they didn't just buy a big warehouse, didn't do the proper zoning verification, and now can only have very, very limited tenants in the warehouse, it's a disaster. This is an issue that you're not going to have.

because you're going to check the zoning verification. Some counties it costs like 25 bucks, gonna be the best money ever spent. So due diligence is huge. Now, due diligence isn't for you. Another way to start out your investing career is to become a limited partner in a partnership. What does that mean? That means you find a general partner.

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Generally, it's called a GP and a limited partner is an LP. And a general partner is putting together a syndication, right? They're collecting funds from a group of individuals to buy property. They're doing the due diligence. You know, obviously when you're investing in a GP, you want to make sure that they're highly versed in the product type, city, real estate in general. So another way that you can deploy money.

without having to worry about losing it, even after you do your due diligence, is to invest with the right GP. And then last, just start small, right? I think people see these big office buildings and shopping malls and warehouses, and they think, I could never buy that, it's so huge. But the reality is, is there are 200,000.

dollar properties. There are $300,000 properties. Start small. You don't need that many properties to create long-term wealth in your life and generational wealth for you and your family. So for your first deal, if you don't want to lose money, start small. Nobody said you have to go big for the win. Now, there is a lot more.

There's a lot more in depth things that I can talk about how to not lose money in your first commercial real estate transaction. And I wanna know what questions y'all have for me. So I want you to DM me at Aviva Real Estate. Any questions you have on how to buy your first property without losing money. To get started in commercial real estate today, head down to my show notes.

There is a really extensive freebie that I spent a lot of time making and I'm really proud of. That's a free guide, how to get started in commercial real estate. And next week, we are going to be talking about your step-by-step guide, how to transition into commercial real estate. I'm looking forward to it. We'll see you next week.