Commercial Real Estate Investing featuring Jon Whitcomb on Cover Your Assets ESPN (1500 a.m. radio) Saturday Mornings from 8-9 a.m.CST
Jon Whitcomb, President and Owner of Metro East Commercial Real Estate, joins Todd Rooker to discuss best strategies and practices for commercial real estate.
| Listen to the podcast – 2/29/20 Cover Your Assets: Commercial Real Estate http://www.skornorth.com/shows/cover-your-assets |
It may be said that Commercial Real Estate is the next level of real estate investing. Maybe you own your own business and would like to own a commercial building. You may already own commercial real estate, your considering selling it and wonder what it’s worth. Perhaps you already own residential investment real estate and would like to take your game to the next level. Possibly, you are entering retirement and converting your investment portfolio to consistent income producing assets such as bonds or annuities however you may not be enthused with the fixed monthly income you will receive. Commercial real estate is an excellent tool for this purpose. Purchasing commercial real estate is like buying an income stream. Regardless, if you have ever wanted to learn about commercial real estate ownership and investing Saturday’s show was for you.
Saturday morning, I interviewed an industry veteran in the commercial real estate business, Jon Whitcomb. He is the owner of, Metro East Commercial Real Estate. I wanted to explore some of Jon’s background and upbringing. First, I always believe it is inspirational to hear about successful small business owners who are self-made. Hearing, not only about their success but also their challenges gives hope to others and makes them real. Secondly, I always believe (this is my sense) that before people do business with you they are more interested in who you are as a person rather than how good you are at your business or profession. That doesn’t make your experience and expertise unimportant it just means the type of person you are matters. They may be interested in finding someone in your business, but the person they choose
(their person) must be trustworthy and solid! Growing up, Jon worked on a farm and was entrepreneurial from an early age. He not only represents buyers and sellers of commercial real estate; he owns and manages his own properties. He is a treasure trove of insight and information when it comes to commercial real estate.
I have long said (as I did on the show) that commercial real estate can be a more sophisticated business. Ironically, this is not to say that everyone participating in it approaches it that way. Nevertheless, to properly analyze commercial investment real estate you must clearly understand the differing types. There is, land and land development, store front retail, office, light industrial, heavy Industrial, warehouse and special purpose. Lastly, hotel and hospitality and multipurpose which encompasses combinations of everything and the many variations in-between.
The main differences are that residential properties tend to increase in value with consistency. The value changes take place less sporadically and more predictably. The values are more driven on supply and demand without regard to cashflow and expenses, meaning that prices continue to increase relative to supply and demand because consumers are willing to pay to live in a certain neighborhood. As an example, the boundaries that determine where their kids will go to school, they are willing to pay more to do so, lifestyle costs. Instead, commercial value is determined primarily by the going cost of square footage in a given market for that type of commercial space, then subtracting the total net operating expense. Meaning, the operational costs and the overall numbers dictate the value. Further, you must be a bit of an economist to be on top of how the economic cycles will affect commercial real estate markets and submarket so you can buy and sell at the best and right time. This means there may be a bit of speculation and timing. The main point is that first and foremost commercial real estate is looked upon as a business where the numbers dictate and appreciation is not a given.
There is an interesting dichotomy to this point and one exception I will make. We could argue that the numbers of residential real estate investing could prove to be more challenging. When a triple-net lease is employed on a commercial property as compared to a gross-lease, the ambiguity of calculating and factoring short- and long-term expenses is eliminated. The tenant makes a separate payment (in addition to the lease payment) to cover ongoing maintenance, repair, and replacement to maintain the property. Whereas, in a gross lease (all residential leases are gross lease) it must be factored in to determine true return on investment. Almost no one who owns single family residential investment properties does this properly. Beyond this one-point, commercial real estate investing can be more challenging.
Here is the good news, people are lazy!? Anything that is even reasonably complex causes the masses to shy away (less competition). This makes the complication a good thing. When people don’t understand something, they perceive it to be risky. When you understand the numbers, you do not perceive it as risky but rather a mathematical formula. Either you don’t buy, or it is a good or better decision. There really is no uncertainty when you know the numbers. We have all heard the rags to riches stories, most often they revolve around real estate. The more zero’s, the more leverage, and most likely the more money to be made. This money is often created through commercial real estate ownership.
People want things to be simple and straightforward. I’ve got news for you, it’s a little more complicated than that! However, if you surround yourself with the right people it can be that simple and straight forward. Building a team that includes Jon Whitcomb and Metro East Commercial Real Estate can be the
difference between incredible success and outright failure. It goes without saying that Jon is my guy and no one that I would rather refer you to.
You can contact Jon Whitcomb and his team by contacting Metro East Commercial Real Estate: 651-351-5005. Jon Whitcomb’s e-mail address is: [email protected]