Commercial Real Estate Investing From A-Z The CRE Playbook: Goals, Asset Classes & Agent Roles
What should be your acquisition targets and goals as an investor? What are the pros and cons of different asset classes? What should your real estate agent do for you and what should you do as an operator? Trinity (Trent) Herrera, commercial director and real estate consultant of Black Tie Real Estate, shares his knowledge.
Read the interview here: https://tinyurl.com/54p9jcvm
How should people decide their acquisition targets?
This is incredibly unique to each person. What's your appetite? Is it residential or commercial real estate? Let's assume it's commercial real estate. Each economist, economics professor, person who studies economics, and person who works in finance or retail is part of a cycle. Every city, block, town, county, state, and even country is in a different cycle of everything all the time. It is chaos.
One of my favorite topics to talk about is the concept of the three-body problem. When you have one item, it is easy to predict what that item will do. It could be a planet, a financial entity, or a person. When you have one variable, it's very easy to calculate. When you have two variables interacting with each other, it starts to get a little harder. But when you have three or more, you start to reach an incalculable level of complexity. When scientists study planet orbits or ask whether this asteroid is going to hit us, they're always calculating a three-body problem. And we have this with real estate in so many ways. It is this chaotic complex, constantly orbiting, always spinning, and shifting off its orbit. It is truly the epitome of a three-body problem, in the sense that it is so vastly complex. It's extremely hard to time.
Most brokers don't bring the math with them.
No, they don't. And it's a big gripe of mine because I work with my peers in the real estate world every day, and as soon as you get to any level of sophistication in commercial real estate, you're crunching numbers pretty hardcore. When you have a fiduciary responsibility to somebody to protect their wealth and their money and make money for them, how can you do that if you can't deeply understand the math? It's one of my cardinal sins in the commercial real estate practice. As an agent, you should understand math and be able to explain it to everybody.
And my wrap-up on acquisitions: find a good partner, stay away from sizzle and hot. You want to be cold in your thinking and logical, knowing your asset types and your "why." This is partly what you're looking to your sponsor for, and part of the relationship you have with your sponsor. The appetite your sponsor has will have a bearing. If you're doing LP or investments like that, then you're going to want to work with a sponsor who has deals that you like.
Trent Herrera
Join our investor club here: www.montecarlorei.com/investors