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  Category: Articles » Finance » Real Estate » Article
 

Commercial Real Estate - How to Ask Your Discovery Questions




By Craig Higdon

In order to make a successful commercial real estate investment you need to know the right questions to ask and the right way to ask them. Since purchasing commercial real estate is a negotiation between the buyer and the seller (and probably their prospective brokers), it is important that you, as the buyer, are prepared. Asking the right questions could help you avoid owning an underperforming asset.

Remember, both parties are trying their best to get what they want, but their goals are diametrically opposed. The seller is trying his or her best to get the highest possible price, while the buyer is trying just as hard to get the property for the least possible amount of money. There's an old saying in the business: "All sellers are liars, all buyers are thieves." While I don't believe in either scenario as a way to do business, those commercial real estate investors who are able to create a win-win transaction will enjoy huge advantages over their more combative competition. And the key to doing that is in your questioning technique.

Finding and creating these win-win deals isn't easy, but making them happen is the basis of successful real estate investment. In many ways, finding the best deals boils down to knowing which questions to ask and is one of the most important of all real estate "secrets."

The key is to ask plenty of open ended questions of either the seller or his agent and to not accept a simple "yes" or "no" answer. If you ask an open ended question and get a yes/no answer, your immediate reaction should be to follow up with additional open ended questions! Obviously, if you keep getting yes/no's to your questions, it may be time to find a more cooperative and serious seller.

Some of the leading questions smart real estate investors use include:

What can you tell me about this piece of property?
What makes this particular property a good investment?
What is it like dealing with the city?
Tell me about your tenants neighbors city, etc.
What can you do to help me get into this property?
What financing are you willing to carry?
What are your neighbors like? Or "how easy are the adjacent property owners to deal with?
How quickly do you need to close? Why?
Why are you selling the property now?
What is the existing financing? How can it be assumed?
What are the down payment requirements?

While the straightforward approach and strategy generally works the best, many successful real estate investors have also found success at using the "Columbo Technique." For those of you too young to remember, Columbo was a dumpy-looking fictional detective who always seemed a couple of cents short of a dollar. However, he had this process where he'd get up to leave after seeming to conclude his suspect interviews and would say something like: "Oh, Mr. Jones, one more thing " And that question would usually catch the perpetrator off guard. I suggest trying it during your discovery process. It can be very enlightening!

You'll need to develop your own list of questions as you do more transactions and I suggest even rehearsing them or incorporating them into some form of due diligence checklist. The bottom line is that the better you question, the better your deals will be.
 
 
About the Author
Craig Higdon, "The Investment Property Insider," works as a commercial mortgage broker. He publishes the weekly "Investment Property Insider" e-zine and blog, http://www.InvestmentPropertyInsider.com/. Visit the blog and get a complimentary report on commercial financing techniques.

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  Some other articles by Craig Higdon
Effective Real Estate Strategies for Slow Markets
Speeding Commercial Real Estate Sales in Slow Markets Effectively building commercial real estate wealth requires the ability to spot a ...

How to Purchase Underperforming Properties with Construction Loans
A SECRET STRATEGY TO TURN LOSERS INTO WINNERS I received a question from a Realtor last week that will give you insight ...

Commercial Real Estate Syndication: Controlling the Property
Getting Control of the Property We've been discussing the process of assembling groups of investors for the purpose of acquiring income producing commercial real estate. As we move to getting the ...

Apartment Loans: Common Multifamily Misconceptions
I had the opportunity this past week to answer a number of questions about apartments. I find a great deal of misinformation ...

Commercial Real Estate Syndication: Property Selection and Purchase, Part 2
We've been discussing the process of assembling groups of investors for the purpose of acquiring income producing commercial real estate. The first part of this article can be found at www.InvesmentPropertyInsider.com/?p=97. We'll assume for the ...

Commercial Real Estate Syndication: Property Selection and Purchase, Part 1
Let's assume that you've decided to start assembling groups of investors to buy investment real estate. If you followed my Roadmap of a successful syndication in my previous articles (Part 1 and ...

  
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