The #1 Property I Would Never Buy

Have you ever wondered why a seemingly promising commercial real estate deal can quickly turn into a financial disaster?

Investors often underestimate the complexities of commercial real estate transactions, assuming that provided numbers are accurate and that managing a property is a breeze.

Join Aviva as she shares a personal story of a deal gone wrong, emphasizing the overlooked challenges within common areas and the financial implications for unsuspecting investors.

BY THE TIME YOU FINISH LISTENING, YOU’LL LEARN:

The often neglected aspects of common areas in commercial real estate and their impact on property income.
The misconception of passive income in real estate and the risks associated with inaccurate property numbers.
Practical steps to ensure due diligence and avoid falling into the trap of a "dumb deal."

Chapters
00:00 Introduction and Listener of the Week
00:29 The Failed Office Building Deal
00:58 Importance of Common Areas in Commercial Real Estate
01:33 Misconceptions about Real Estate Investing
03:28 Finding a Mentor and a Caring Broker
04:26 Avoiding Dumb Deals in Commercial Real Estate
04:55 Conclusion

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Transcript

Aviva Sonenreich (00:00.098)

This week's Listener of the Week is Al Sells Tampa. Al, thank you for your five-star review. And for those of you listening, if you leave a five-star review below, you might be next week's Listener of the Week, week, week. So years ago, we were under contract on an office building and the tenants looked good, the numbers looked good, the location was great, and the deal came crashing.

down. And what this episode is, is talking about a property I would never buy as a commercial real estate expert, and we're going to dig in to what killed this deal. Now, I want you to picture going to the dentist's office. You walk in the building and there's a reception area, and then you go up the hallway, maybe you go to the bathroom, and then you go to your dentist's office. Now,

When you are in the hallway, when you are in the lobby, when you are in the bathrooms in the building, you are in what is called common area. Now, from just a novice's eye, you don't think about something like that. You don't think about the janitorial service that you need when it comes to common area. You don't think about who's paying for the lighting in the common area. Well, when you're buying a building, you get to start.

unearthing those numbers.

Aviva Sonenreich (01:33.322)

Everybody thinks real estate is passive, right? You find your tenant, you put them in, and then you go to the beach and party, which I wish it was like that, but unfortunately it's not. And then people also think that when you're provided numbers on a property from the broker or from ownership that they're correct. And a mistake people make when they assume that property is passive or that the numbers are correct is that you could A,

buy a building that doesn't actually cashflow, which is the exact opposite of why we're buying it, or B, you get a management-intensive building, but you're expecting it to be simple. So people make this mistake because there's no commercial real estate playbook. Brokers sometimes don't care, so if they need to smudge the numbers, it'll work in...

you know, they can get the deal done faster. But it's really important to understand that as a buyer and even as a broker, you need to do proper due diligence in order to see a deal through. Now, how do you do that? Good question, I thought you'd never ask. First and foremost, I implore you to have a qualified real estate attorney look at...

every single document in your transaction file. I know it can be expensive, but the money you're spending with an attorney is far less than buying a property that has a negative cash flow. Two, find a mentor. Find somebody you know in your community circle, whatever, who has experience, and then provide them a value somehow so that...

you can get knowledge because the commercial real estate industry is the wild west. And unless you know every single number down to the penny exactly that you verified yourself, you are in shark-infested waters, literally. So find a mentor, find a broker who cares, right? You want to surround yourself with people who are capable of transacting and who have already walked somebody else through a transaction.

Aviva Sonenreich (03:57.738)

so that you can make sure you don't do the number one rule, which is not doing a dumb deal. Do your due diligence and verify every number yourself. Now, this works because commercial real estate is a high risk, high reward sport, right? So naturally with anything that has high risk and high reward, there are certain steps that you can follow to make sure you're doing

the right deal for you. When we were going to buy the office building with the common area, we noticed that the tenants were not paying for the common area and that it ultimately completely ruined the income on the deal. Don't do that. We don't buy dumb deals. Now, what questions do you all have for me? Head over to my Instagram and DM me at Aviva Real Estate.

And if you want to learn more about commercial real estate, head down to the show notes for my free guide as to how to get started in commercial real estate. We'll see you next week.