Reviewed by Jocelyn Watkin on behalf of Landlords Bookstore
This is an inspiring and cracking read from a commercial real estate master. While Dolf de Roos has written many books on similar themes, he still manages to offer plenty of fresh, yet realistic ideas and perspectives. The content, his so-readable style of writing and his ability to explain technical concepts in an easy-to-understand way means this book is ideal for both the novice and the more experienced investor.
The book begins with some definitions of commercial real estate and de Roos openly discusses both the upsides and downsides of owning commercial real estate, especially when compared with residential investing. In particular, he covers two perceived downsides:
- the difficulty of acquiring/retaining commercial tenants, and
- that banks/lending institutions will only lend a smaller proportion of a commercial property (than what they would with residential)
A large chunk of the next part of the book is devoted to strategies he recommends to overcome these downsides. De Roos makes full use of his own real-life case studies and examples to explain the options available, which range from locations in New Zealand to those all over the western world.
In addition to the useful chapters on analysing deals and negotiation, de Roos provides samples of proposals he has actually used when seeking finance. These give potential investors some good examples of the sort of documentation that lending institutions require when considering loans for commercial real estate.
Towards the end of the book, de Roos outlines his thirteen golden rules of commercial real estate investment. These are a succinct summary of everything he has covered in the previous chapters. Some have messages that would be relevant in any endeavour such as the too many cooks spoil the broth point in No.7. That is: The number of voting partners is directly proportional to the failure of the project. Others are pragmatic for this specific type of investing, such as No.8, which explains that whether you are averse to litigation or not, sooner or later you will end up involved in a lawsuit. Even so, de Roos advises to stay in good communication with all involved and to try to think outside the box to come up with a solution beneficial to everyone, which will be a lot cheaper than lengthy litigation. He makes pertinent points with both No.9 and No.10 which are respectively: It only takes one deal to go broke and It only takes one deal to make a million dollars.
And, therein lies the rub with commercial real estate investing. It is not easy, and de Roos does not attempt to hide this. He is very open about the risks involved, although he describes how most of these risks can be reduced or controlled with care and attention to detail. However, he cautions, those investors willing to conduct the right due diligence are in short supply. While there is never a shortage of deals, there is a shortage of people with the patience, determination, perseverance and focus necessary to find and negotiate the right deal.
To demonstrate this, he describes one of his fundamental rules - the 100:10:3:1 rule. That is, for every 100 properties looked at, there might only be 10 worth submitting an offer on. Of those 10 offers, maybe only three are accepted. Once due diligence is completed, maybe only one will result in a purchase. Sometimes there will be no purchase and the process starts all over again.
De Roos succeeds as a commercial real estate investor because he can do what others can not or will not do. This does not mean dishonesty or taking unfair advantage of people. He means that he has to work hard and think outside the square to be successful. However, it is also clear that he revels in the excitement, loves the cut and thrust of deal making and he gets a lot of fun out of this work. His last chapter is titled Living life to the Fullest. For those who have the right determination and like exploring their own outer limits, commercial real estate investing can offer a lucrative future, exciting opportunities and a great deal of enjoyment.
Commercial Real Estate Investing is available through the Landlords Bookstore www.goodreturns.co.nz/books or call 0800 345 675
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