How to Buy Industrial Properties? What is Happening in the Industrial Space?

Commercial Real Estate Investing From A-Z

What is the state of industrial investing today? What are some techniques you can use to buy industrial properties? Darren Smith, Principal of Solid Growth Properties shares his tips.

You can read this entire episode here: https://bit.ly/3FrseNd

Why did you decide to focus on industrial? What is the state of that asset class today?

Like most investors out there, I started in the single family and dabbled in multifamily and mobile home parks. I actually got hurt really badly in mobile home parks during the last crash. I definitely took some lumps, made some money, so I was able to kind of recover but I’ve tried a lot of different things. The usual transition from people who are doing single family houses, flipping, wholesaling, rentals is to go into multifamily, maybe they get a duplex or a fourplex. And then they scale up from there into larger and larger number of units. I have several good friends who own hundreds and in some cases 1000’s of units in multifamily and are doing it very successfully. What I learned from watching them, though, that it is ultra competitive, my friends are really sharp people that are working really hard. They got really creative and they put these deals together with syndications on cap rates that I would not be comfortable doing. And I didn’t know if I could compete in that market. They’re just better than me.

You have a different and maybe unique approach to find industrial properties, please tell us a little bit about that.

All I did was I took the things that other people taught me on the single family side, and I just applied them to industrial real estate. I take those things, and I step them up to a higher level of quality. If you’re marketing to houses, maybe you’ll have someone from South America doing your cold calling, maybe you’ll mail them a postcard or more generic type things. Whenever I’m dealing with the commercial side, having that level of sophistication as high as you possibly can when you’re interacting with these people is important, to show your credibility.

Are you finding properties only through mailers today?

That is the vast majority of properties that I come across and that I’m talking with, direct marketing. That said, I do love working with brokers, two of my favorite properties came from brokers.

A lot of times brokers are very protective of speaking to the sellers directly, how do you go about that?

I don't go around it, I really want to work with these brokers. Just as if I'm talking with a seller, I always want to try and find out what are they trying to accomplish? What is in the seller's best interest? How do I help them? I have that same conversation with the broker, Hey, Mr. broker, Mrs. broker, I bought a lot of properties, this is kind of how I work, this is what I like to do and what I like to accomplish, what I found has been really successful in the past so that I can get you your full commission as soon as possible is if we could all just sit down and see if there's something that we could work out. I don't know if I've ever had a situation where I talked to a broker and I said, Can you go ask the seller if they're open to terms? That's a DOA conversation. The deal is dead because the first thing people say is no, I want all cash, top dollar. Well, sometimes that property may sit on the market for six months, they may want all cash top dollar, but what if maybe I could come to them and say, What if I paid you top dollar, but you held a 20% second against the property after the bank. So you're going to get 70% from the bank, you're going to get 10% of my cash, and you're going to hold 20% as a second. That gets you the price you're looking for.

Darren Smith

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