Commercial Real Estate
The Challenges of Navigating Commercial Real Estate
Three of Asheville's top commercial real estate experts presented at AVLMeetup to share their journey and explain commercial real estate fundamentals. Because a lot of complex terminology and calculations are involved, this topic can be difficult to understand. Nevertheless, the speakers offered valuable insights into how the business works and provided helpful resources for those looking to get into it.
Despite coming from varied backgrounds and not having much initial experience in commercial real estate, Wes Reinhardt, Chris Gragtmans, and Austin Walker have all managed to become accomplished professionals in the field. Reinhardt has been in this business for 18 years ever since he moved away from Wall Street to Asheville and created his own company Altamus Property Management. Gragtmans invested in multifamily properties after his athletic career ended, prompting him to teach himself more about real estate; After seven years of learning more about it, he is currently working with KW Commercial. On the other hand, Walker started out as a part of a project related to the redevelopment of the Basilica property when he first moved to Asheville in 2001 and shifted over to Whitney Commercial Real Estate in 2006.
Residential vs. Commercial Real Estate
Austin, Chris, and Wes provided insights into commercial and residential real estate differences. The nature of the lessor-lessee relationship is much more established in commercial real estate than it is in residential. This is largely due to the length of a tenant's stay; in residential properties, it averages about a year, while commercial tenants may remain for three to thirteen years - thus making it necessary for landlords to ensure that the property meets the tenant's needs throughout their tenancy. Furthermore, part of a landlord’s responsibility with regard to commercial real estate is to make sure any modifications improve their client's business environment. In contrast, when working with residential property owners or tenants, emphasis is put on ensuring basic maintenance (e.g., shoveling snow and mowing lawns).
It is commonly believed that commercial real estate transactions take longer than residential real estate, but in reality, there is no set timeline for commercial transactions. Generally, leases take less time than sales, and the amount of time spent varies depending on whether the agent represents the tenant or not. When Wes entered the real estate industry, a seasoned commercial player told him it would take a year to close his first deal. This advice did not fully register with Wes until ten months had passed without a deal, causing him to question his decision to change jobs and uproot his family. It was not until the end of the twelve-month period that Wes could finally land his first deal. Both Wes and Chris advise new entrants to the commercial real estate business to be patient and gain experience, as it can be a slow process at first.
Valuing Commercial Real Estate
There is a prevalent misunderstanding regarding how property values are determined in commercial real estate. Cap rates denote a property's income and are commonly used to establish its value. However, this process is more intricate than it seems, and having a professional who truly comprehends the market is crucial. The value of a property is frequently unique to each transaction and asset. Nevertheless, gauging property value becomes less complex with expertise and industry awareness.
Expert Advice From The Panel
The three panelists were asked to share some wisdom from their experience that would benefit beginners in the field. They discussed potential tips on how to get started and what strategies could best cultivate success.
Wes: As a commercial real estate broker, it’s critical to understand the complexity of this market and be able to provide guidance throughout the process. Maintaining an ongoing relationship with clients and having open communication is important to ensure they have the most complete understanding of their dealings. Aim not only to close deals but also to always give attentive service to build rapport and trust.
Chris: Many individuals possess hard skills, such as comprehending the mechanics of math and deal-making, but it's the soft skills, like acting as a mediator between opposing parties, that truly matter. Being aware of this enables you to effectively represent your client, thereby increasing the likelihood of a successful transaction. While it's crucial to know about real estate, it's equally important to understand human behavior.
Austin: Know the product! The only way to know the product is to go out there with the people doing the deals.
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