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Investments in physical real estate (rather than via REITS, syndications, private equity, and mortgage backed securities, etc) can generally be put into three categories:
Active commercial real estate investment involves direct and active management of a physical commercial property or a tangible commercial real estate asset.
An investor can choose from several commercial real estate asset types for investment based on each investor’s experience, risk tolerance, investing timeframe, and personal preference:
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Buyers of commercial real estate typically fall into two distinctive categories:
Sometimes, one can wear all four hats as investor, owner, user, and occupier for one property. Oftentimes commercial real estate investors lease out properties to users or occupiers.
Investors and occupiers often have different priority and focus: An investor may be more interested in the appreciation, cap rate, internal rate of return, cash-on-cash return, and strategies for financial leverage and exit.
An owner / user / occupier often focuses on location, building amenities (such as layout, power supply, clear height, loading, etc), convenience for employees and/or vendors, accessibility to nearby surrounding amenities, and other factors to support operational business needs and future growth.
The following factors warrant careful consideration when making purchase decisions related to commercial real estate investment:
1) Interview several local commercial real estate agents. It is very important to partner with the right commercial real estate expert who shares the same values as yours, and ideally someone who also owns commercial real estate properties. Make sure the broker you choose has extensive knowledge and experience of the local market, has a keen eye towards growth, as well as access to both published listings AND off-market properties (“on and off market opportunities”), and is well connected to a network of resources (such as attorney, tax consultant, contractor, architect, engineer, inspector, environmental specialist, appraiser, etc). If that agent is among the few with the designations of SIOR and/or CCIM, you are dealing with someone with a very high level of experience, expertise, and integrity.
2) Run a detailed analysis of the property such as financial metrics, market analysis, user decision matrix, and investment performance. The best agent thinks and advises with the holistic picture in mind for YOUR immediate needs and long term success, and will go above and beyond in serving YOUR unique situation. The Ivy Group is well known for offering a deep dive for each and every client. For example, one of the Ivy Group’s clients bought a commercial property for $2.8 MM. After holding it for 9 years, the client achieved an impressive 221% ROI when it was sold for $9 MM. During their time of ownership the Ivy Group also advised the client and helped the client lease excess property for passive rental income.
3) Connect and build relationships with lenders. Lenders specialize in different asset types with unique lending criteria and risk guidelines. For example, Chase Bank has a great multifamily lending program, and Silicon Valley Bank offers great options for both startups and mature technology companies. Another often overlooked option are credit unions. Oftentimes, lenders are required to diversify their lending to benefit the local community. When your loan is turned down by one lender, it may be a great deal for another. It pays to shop around, ask questions, and pick the right loan program that matches your investment criteria and timeline.
Follow these three simple steps, and consistently look for and evaluate opportunities. Pretty soon, you’ll be on your way to owning a portfolio of passive income producing assets. Happy investing!
When you are ready to buy a commercial property, or simply want to have an investment consultation, the Ivy Group is ready to help you reach your goals with more than 100 years of combined experience and expertise in real estate, investment, technology and engineering. Contact us with your next commercial real estate needs.
Copyright ©️ 2025 by Tim Vi Tran, SIOR, CCIM. All rights reserved
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