Advice from Auckland Commercial Investors for would be Rookie Agent!

[Assena]

Hi everyone, being an avid reader of PT, I am hoping for some advice from those of you who are investors in Commercial property. I have decided to make a career move into Commercial Sales (I know some may argue that this is not the right time to do so, however it is always a great time to learn something new!)

As part of my research I am trying to understand the different areas involved in Commercial investing and the advantages / disadvantages of these from an Investors perspective.

I thought it might be worthwhile getting the opinions (and I know that these will differ from person to person) of people who are out there "walking the walk etc" (as either buyers or sellers, both in today's market and in past markets).

How do you decide where and what you want to buy - do you have a set of rules you do not deviate from or work on a case-by-case basis? Pros and cons of industrial, retail, office buildings, etc, staying close to the city or out to the industrial areas, basically just trying to get a feel for what investors are looking for, to help paint a picture of where might be a good place to start!

Any thoughts will be much appreciated.

thanks
Vanessa

[Kay]

Moving to Commercial

The first thing to do is read everything written by Bob Jones & Ollie Newland about
property investing. They always point out the advantages and disadvantages of the various types. The next thing necessary is to "have deep pockets", which Ollie will tell you are very necessary to survive when tenants leave or go under.
Good Luck.

[Davo36]

I imagine the reason not many people have replied here is that you ask a very big and broad question.

What do investors want? Well at the end of the day I suppose they want to make money. How do we want to do that? Well in a number of ways. Investors are different, do different things and take different levels of risk.

Yes, I agree the first thing to do is start reading. To the books mentioned above I would add Commercial Investor's Real Estate Guide by Peter Aranyi and Survive and Prosper in a Falling Real Estate Market by the same author. Also more general investment books in business and property.

As an investor you have 2 sources of increasing wealth. The first (and most important in my view) is income from rents, the second is capital appreciation in the value of your properties. The latter is where you make the real money but you need the former to do it.

At this point I wonder whereabouts in Auckland you will be working? What type of agency? Because commercial real estate can consist of a small office or industrial unit worth say $150,000 to very large properties worth tens of millions. And the investors involved at the different price/value points are very different people operating in different ways.

As a C&I salesperson you will be doing 2 things, leasing and selling. Ideally you need to do both so you can get a handle on how it all works.

Leasing can be quite hard work, time consumind and you don't get paid that well. Selling is no more difficult and much more lucrative. However, it's never that simple. A quick and easy lease can be great whereas a sale that takes 6 months and falls over is a nightmare.

So you need to learn about things like:

• Agreements to Lease, Deeds of Lease.
• All the leasing terminology like rent reviews, renewals etc.
• The GST situation with C&I property which can be tricky.
• Rental rates for property in your area.
• How investors can add value to a property.
• What sort of tenants may be interested in a certain property.
• What sort of buyer may be interested in a certain property.

The buyers and sellers you will meet in commercial real esate are usually people in business in one way or another. So they either need the property for their own business or they have made money in their business and need to invest it somewhere. These people are usually quite switched on and yout won't be able to get away with anything that's not 100% accurate.

That's all I have time for right now, if I think of more, I'll post it. I guess you just have to give it a go. It will be tough at this point in time.

Cheers

David

[Assena]

Thanks for Replies

Thanks for your replies guys! I have several of the books you mention already and have made a start on these. David, I appreciate your detailed response, given that my original post was quite broad as you mentioned.

I figure the best way to learn is to jump in and give it a go and having recently sat my R E Salesperson's course, I am in the throws of organising this.

I am realistic about my timing and market conditions etc. and will be going into this with my eyes open. I figure there is no better time to be learning from those who have been in the industry for awhile.

As you mention, deciding on what to focus on is also important - it seems that most agents are both selling and leasing. I heard of an instance recently where an agent who usually sells was doing some leasing "to keep the wolves at bay" - which obviously says a lot about the current market. I am still working through where i want to start off - industrial, corp office sales or leasing in city or city fringe etc. I'm not that interested in selling retail at this point.

Do you work or invest in Commercial property? Anything else you think may be relevant is much appreciated!

Thanks again!

[fudosan]

I'm not that interested in selling retail at this point.

Are there any reasons why you want to stay away from retail?

[Assena]

Hi Fudosan

My main reason for not persuing retail at this point is simply that based on the research I've done and people I have spoken to in the industry, it seems that retail is suffering more than other areas at the moment. I figure my efforts would be better spent elsewhere right now, but that's just my own thoughts.

[fudosan]

it seems that retail is suffering more than other areas at the moment.

Thanks for sharing your thoughts. It's exactly for this same reason that I like retail, as there is less competition among buyers.

[Assena]

Hi Fudosan

After i replied to your first question I did see from other posts i was reading through that you like retail for that very reason - makes sense from a buying perspective!

[fudosan]

Hi Vanessa,

Good luck on your journey. If you come across retail properties in Auckland CBD, you are welcome to PM me.