Commercial Real Estate For Sale | 9 Ways to Find More Deals
Need help generating more commercial real estate leads?
You have come to the right place. From basic strategies like using a commercial real estate broker to generating leads through the landscapers (yes, that is correct!), this blog post is an ultimate guide for finding commercial real estate for sale.
Let us get started by first talking about the two different types of commercial real estate for sale – on-market and off-market.
On-market vs. off-market commercial real estate for sale
The tactics for finding commercial real estate for sale are simple. You don’t need a Ph.D. in commercial real estate or a 160IQ to find commercial real estate for sale. However, uncovering the best deals – that is, the deals with the most “meat on the bone”, upside potential and built in equity – require will a higher time investment.
In general, of the two types of commercial real estate, on-market deals are easier to find.
On-market commercial real estate for sale are deals that are listed by commercial real estate brokers. These are the easiest deals to find because they are heavily marketed by brokers. Consequently, there typically isn’t as much “meat on the bone” compared to off-market deals (of course, there are exemptions).
In fact, an on-market deal selling above market value is not uncommon. Since the on-market commercial real estate for sale is heavily marketed, many more commercial real estate investors will submit offers, which can result in a bidding war and an increase purchase price.
Also, on-market commercial real estate for sale may take longer to close on. Generally, the offer process for on-market deals includes a touring period, a call-to-offers date, a time range for the seller to review all of the offers, a best-and-final offers round, and a best-and-final sellers call before the deal is even placed under contract.
However, these potential drawbacks can be minimized or avoided entirely by a commercial real estate investor who has a strong track record of closing on similar deals in the past and/or has a pre-existing relationship with the listing broker. At the end of the day, the seller’s main motivation is closing. Therefore, on-market commercial real estate for sale can be advantageous for commercial real estate investors who are (rightly) perceived as closers. They will get awarded more on-market deals, even if they don’t submit the highest purchase price.
Off-market deals is the other category of commercial real estate for sale. Off-market deals are not listed by commercial real estate brokers. However, commercial real estate brokers can be good sources for off-market leads (more on this later in the blog post). Therefore, generating off-market commercial real estate leads requires more proactive effort.
Experienced and reputable commercial real estate investors will close more off-market deals because this isn’t their first rodeo. The sellers know they are operating a well-oiled machine and the likelihood of the deal closing is high.
Who would you rather have perform open-heart surgery on a loved one? A freshly minted medical school graduate, or the top heart surgeon in the state who has complete thousands of successful procedures? (Rhetorical question). Therefore, a seller is more confident signing a contract with an experienced commercial real estate investor who has a history of closing rather than a brand-new investor with no deals under their belt.
The main benefit of off-market commercial real estate for sale is the potential for the juiciest piece of “meat on the bone” at closing. It is common for commercial real estate investors to secure a contract on an off-market deal at a purchase price that is 1%, 5%, 10%, or more below the appraised value. This means that at closing, the investor has instantly generated 1%, 5%, 10%, or more in free equity. The reason is because there is less, or no competition. Usually, there is only one buyer, so bidding wars are avoided.
Also, if the seller is highly motivated, the closing process can be fast. However, it is also possible to have an extremely long closing horizon. A negotiation period lasting multiple months – even up to a year or longer – isn’t uncommon with off-market commercial real estate deals.
As I mentioned previously, a commercial real estate investor can secure the deal at a better price because there is less competition. However, this is not always the case for large commercial real estate deals. Larger commercial real estate for sale is likely owned by a sophisticated investor. They will know the market value of their asset and will not accept a lowball offer (unless they are motivated to sell because they are distressed – more on this later in the blog post). In fact, it is possible to pay above market value for an off-market deal. Since the seller isn’t receiving multiple offers, the market won’t set the price. Therefore, unsophisticated commercial real estate investors may get a sucker price.
Lastly, the commercial real estate investor can work directly with the owner in order to determine their unique needs for selling, which means that there is more opportunity for creative financing.
Overall, both on-market and off-market commercial real estate for sale have their pros and cons. Therefore, the best approach is to pursue on-market and off-market deals.
So, how do you find on-market and off-market commercial real estate for sale?
Let’s start with how to find on-market commercial real estate for sale.
How to find on-market commercial real estate for sale
On-market deals are always widely marketed by commercial real estate brokers. Therefore, they are very easy to find.
1. Commercial Real Estate Brokerages: Most of the larger commercial real estate brokerages list their deals for sale on their websites. If you simply Google “commercial real estate brokers in (city)”, you will be presented with a long list of commercial real state brokerage. However, I recommend being more specific by searching for commercial real estate brokers who focus on your niche. For example, if you are looking to find apartments for sale, Google “commercial apartment brokers in (city)” or “commercial multifamily brokers in (city)”.
Each commercial real estate brokerage’s website will have a section where they list commercial real estate for sale.
For example, when I search “commercial apartment brokerages in Chicago”, SVN Chicago Commercial is a top result. On their website, they have a property search function with a list of all their commercial real estate for sale:
One approach is to visit the commercial real estate brokerage’s website each week to look for new opportunities. The more efficient method is to subscribe so that new offerings are sent to your email inbox automatically. Locate the “subscribe” function on the brokerage’s website and input your contact information.
Repeat this process for as many commercial real estate brokerages as you want, and you will receive commercial real estate for sale in your email inbox every day.
2. LoopNet: Another way to find on-market commercial real estate for sale is on LoopNet. LoopNet is an online listing platform where commercial real estate brokers can list commercial real estate for sale.
Every large commercial real estate brokerage in a market should have a website where they list commercial real estate for sale. But some of the smaller commercial real estate brokerages may not have a website, or their website isn’t easily found on Google. Smaller brokerages do, however, list commercial real estate for sale on LoopNet.
LoopNet is also very easy to use. Simply select a property type and market, and you will be presented with a list of all the commercial real estate for sale.
Usually, most of the commercial real estate for sale on LoopNet are a repeat of deals listed on commercial real estate brokerage’s websites. However, others will be brand new deals you’ve never seen before (listed by smaller brokers who lists you aren’t subscribed to).
How to find more off-market commercial real estate for sale.
Finding off-market commercial real estate for sale generally requires more effort compared to on-market. Unlike on-market, there isn’t a website with a list of off-market commercial real estate for sale.
The overall idea behind off-market deals is to find an owner who is motivated to sell their commercial real estate before that owner has enlisted the services of a commercial real estate broker.
There are three main ways an owner can be motivated to sell their commercial real estate.
The most common reason why an owner is motivated to sell is because they are “distressed” in some form or fashion. There are literally countless ways an owner of commercial real estate can be distressed. Here a few examples:
- Delinquent on taxes
- Delinquent on mortgage
- Building code violations
- Health code violations
- Facing foreclosure
- Natural disaster damaged the property (i.e., fire, hurricane, tornado)
- High vacancy, usually due to evictions
- Recently experienced a large increase in taxes
- Mismanaged by their property management company
- Lots of deferred maintenance
- Falling out with business partner
- Personal reasons (i.e., divorce, death in family, divorce, illness, etc.)
A second common reason why an owner would be motivated to sell is if they are at the end of their business plan. For example, the typical hold period on a value-add apartment deal is 5 to 10 years. The apartment is acquired, renovations are performed over 12 to 24 months, the property is held for cash flow for another 3 to 9 years and is sold. The motivation is to sell so that they and their investors can realize the gain in equity and reinvest into a new opportunity.
The third common reason why an owner would be motivated to sell is because they are tired of being a landlord. They’ve owned the commercial real estate for 10, 20, 30 or more years and are ready to cash out to retire.
As I mentioned previously, the overall idea is to implement market strategies that target these types of motivated sellers, or people who know these types of motivated seller. I have previously created a detailed blog post that outlines how to create a list of motivated sellers – 7 free and paid online services to generate off-market apartment deals.
Now what do you do with this list?
3. Direct mail: Probably the most common strategy for finding off-market commercial real estate for sale is direct mail. A direct mail campaign consists of sending out a batch of letters to a list of motivated commercial real estate owners with the purpose of sparking a conversation that results in the acquisition of their property.
I have previously written a blog post that outline how to use direct mail to find off-market commercial real estate for sale – the ultimate guide to a successful direct mailing campaign. Overall, the strategy includes creating a list of motivated commercial real estate owners, creating a marketing piece to send to the owners, screening incoming calls and qualifying deals, and ultimately negotiating an offer price.
Direct mailing campaigns can be used to target all three types of motivated sellers – distress, at the end of the business plan, and tired of being a landlord.
4. Cold calling/cold texting: An iteration of the direct mail approach is cold calling and cold texting. After a list of motivated commercial real estate owners is created, rather than sending a marketing piece, pick up the phone and call and/or text the owner.
For example, click here for a story about an investor who was able to find two apartment communities totaling 340 units by texting motivated apartment owners.
The extra step required for this strategy, depending on the service used to generate the motivated seller list, is skip tracing. Most of the free and inexpensive list generating services only output an owner’s mailing address. Therefore, to acquire the owners phone number, you must “skip trace” the list. Here is a list of skip tracing services investors who have been interviewed on my podcast use:
Like direct mail, cold calling/texting can be used to target all three types of motivated sellers.
5. Thought leadership platform: A more creative and indirect approach to is to use a thought leadership platform to find commercial real estate for sale. A thought leadership platform offers unique information, insights, and ideas that will position you as a credible and recognized expert in your industry.
Common examples of thought leadership platforms are podcasts, blogs, YouTube channels, newsletter, publishing books, hosting conferences, and meetup groups.
Click here for an in-depth blog post on the process for how to create a thought leadership platform.
With a thought leadership platform, you will build new friendships and business relationships. It allows you to stay top of mind of commercial real estate entrepreneurs and professionals because you are constantly providing valuable, free information. Essentially, you can continuously network with people on a global level 24/7.
Now, what did I write earlier about how to find off-market deals? You must communicate with motivated owners and people who know motivated owners.
Well, with a thought leadership platform, your following (readers, listeners, views, etc.) will consist of both parties. Some aspect of your thought leadership platform should let your following know what types of deals you are looking to purchase. This can be as direct as saying “send me deals” or as indirect saying “I am a value-add apartment syndicator.” Assuming you have a website and a “contact us” function, your followers can reach out if they or something they know are motivated to sell their commercial real estate.
Something I also mentioned earlier about both on-market and off-market deals is that the stronger your track record, the more likely you will be awarded a deal. The main weight of your track record is your previous commercial real estate experience. However, having an established thought leadership platform will also increase your credibility in the eyes of owners and commercial real estate brokers.
“This guy/girl has a massive following on YouTube. He they must know what they are doing!”
Therefore, not only is a thought leadership platform a great way to find off-market commercial real estate for sale, but it will also help you get awarded more deals.
Unlike direct mail and cold calling, a thought leadership platform isn’t typically a direct approach to finding commercial real estate for sale. The exception would be if you created a meetup group to find commercial real estate for sale. Click here for a blog post I wrote about real estate investors who directly sourced deals through a meetup group. Therefore, I do not recommend using a thought leadership platform as your only approach to finding commercial real estate for sale. It should be used in tandem with other strategies on this list.
6. Call “for rent” ads: Another creative approach to finding commercial real estate for sale is to calling “for rent” and “for lease” ads.
As I mentioned previously, an owner may be motivated to sell their commercial real estate because of vacancies. Therefore, when you see a “for rent” or “for lease” ad, you know that they are experiencing some level of vacancy at their commercial real estate. You have immediately identified a potential pain point.
Depending on the number of vacancies or length of the vacancy, they may be at the point where they are willing to sell.
This strategy works better for smaller commercial real estate. It is unlikely that an owner of a 300-unit property, for example, will sell based on 10 vacant unit. Whereas an owner of a 10-unit property would be motivated to sell if all 10 units were vacant.
Additionally, with larger commercial real estate, the contact information provided in the “for rent” or “for lease” ad is likely a leasing agent and not the owner.
However, don’t let that stop you from trying this strategy on large commercial real estate. Maybe, once they are ready to sell, they remember you (especially if you consistently follow up) and give you a first look at the deal before going to market.
7. Nearby apartments: For every on-market commercial real estate for sale you come across, reach out to the owner of surrounding properties and attempt to purchase two deals: the on-market deal and an off-market deal.
This is an approach I used in the past to find commercial real estate for sale. Click here for the full story on this strategy in action. In short, our commercial real estate broker reached out to the owner of an apartment across the street from an on-market deal. The owner happened to be interested in selling, so we put both deals under contract.
At the time, the market was very competitive, and the on-market deal entered into a bidding war. However, because of the economies of scale and complementary nature of the off-market opportunity, we were able to pay a little bit more for the on-market opportunity, ultimately coming out as the victor of the bidding war.
8. Commercial real estate brokerages: As I mentioned at the beginning of this blog post, commercial real estate brokerages can also be one of the best ways to find off-market commercial real estate for sale. However, there is a caveat.
Before commercial real estate brokers bring a property to market, they may send the opportunity to commercial real estate investors who they know can close on the deal. This is either to give them a chance to actually purchase the deal prior to going to market or to, at minimum, give them a head start.
The key phrase above is “who they know can close on the deal”. Therefore, unless you have the established track record I’ve mentioned multiple times in this blog post, you likely won’t have access to off-market deals from commercial real estate brokers.
When a commercial real estate investor first speaks with a commercial real estate broker, the broker will ask questions to gauge how serious the investor is.
“Are they able to close on a deal or are they a tire kicker who is wasting my time?”
If they don’t think you are capable of closing on a deal, there is zero percent chance they will send you off-market commercial real estate for sale.
I interviewed a top commercial real estate broker in Washington, DC, and he provided me with the five questions he asks investors to determine if they are serious and capable of closing. You can read the full blog post by clicking here, but the five questions are:
- Have you completed a deal before?
- Can you send me examples of what you’ve done?
- Do you understand the market?
- How would you finance a potential deal?
- What are your goals?
If you haven’t completed a deal, cannot answer simple questions about the market, don’t have the cash and/or financing capabilities, and don’t have a vision, no broker is going to send you off-market commercial real estate for sale. However, the exception would be if someone else on the team does have the required track record. When that is the case, your reply to each question would be “well, my business partner has…” or “my property management company has…”
9. Commercial Real Estate Vendors
Anyone involved in the rendering their services to commercial real estate, like electricians, carpet installers, roofers, plumbers, HVAC professionals, pool repairman, lawn mowing companies, landscapers, etc. can be your own personal “birddoggers”, generating motivated seller commercial real estate leads with zero competition.
One of Joe’s family members owns a lawn mowing company. One of their clients was behind on their payments. They asked Joe, “do you know why a property management company wouldn’t pay a contractor for services?” Joe replied, “well, it’s not the property management company but the owner who is the problem. They likely have liquidity issues and cannot pay the bills.”
Just like a commercial real estate owner who isn’t paying their taxes or mortgages, one that isn’t paying their contractors may indicate motivation to sell. Therefore, to generate potential commercial real estate for sale, form relationships with local commercial real estate vendors and ask for a list of clients who are in arrears.
Simply calling up random lawn mowing companies may not be the best use of your time (although it might work). The better approach is to use a vendor’s service first and then ask them to notify you of local apartments who are behind on their payments.
Conclusion – How to Find Commercial Real Estate For Sale
These are eight ways to find more commercial real estate for sale.
Which strategies should you pursue?
I recommend everyone who is interested in finding more commercial real estate for sale to implement to the two on-market strategies – subscribing to commercial real estate brokerage’s listings and searching on LoopNet.
Next, I recommend starting a thought leadership platform, for both the credibility and networking benefits.
Then, of the remaining off-market commercial real estate lead generation strategies, I recommend starting with one. Test is out for six months and analyze the results. If it works, great – keep doing it. If it isn’t working, select a different strategy to test for another six months.
Unfortunately, there isn’t a one-sized fits all approach to finding commercial real estate for sale. The strategy or strategies that work best depend on the market, the overall economy, your business plan, and your level of experience.
However, a commercial real estate investor somewhere out there has been able to find commercial real estate for sale using each of the eight strategies in this blog post.
The key is consistency!
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.