Land Developer Pasqualino Mazza discusses five commercial real estate investment strategies for newcomers and well-seasoned professionals.
Investing in commercial real estate can offer big rewards. However, it also involves taking big risks with high startup costs. Toronto land developer Pasqualino Mazza discusses tried and true strategies to make it in commercial development.
The Commercial BRRRR Acronym Works Per Pasqualino Mazza
This strategy can help you evaluate your investments.
BRRRR stands for:
- Buy real estate
- Rehab for the best value for money
- Rent the property out to help cover the down payment
- Refinance the mortgage
- Repeat with another property
Pasqualino Mazza uses this strategy for tennis office buildings and apartment buildings with hundreds of units. It’s scalable and it works, according to Mazza.
In order for this strategy to work, you have to find an undervalued property. It could be a case of a motivated seller, but it usually involves a distressed property that requires some upfront modifications. Renovating the building increases the perceived value to potential tenants.
If you do your job right, you should be able to refinance the building at a favorable rate and get your original investment out of the property. You still enjoy the cash flow, but now you have your original investment back to start over again on another property.
If You Like to Start From Scratch Development Might Be for You Says Pasqualino Mazza
Although it involves more upfront cost to develop land from scratch, it lets you start out with a blank slate, says Pasqualino Mazza. Keep in mind that development is very risky. It has the potential to create massive wealth, but you can also lose your investment. It’s important to get the right team behind you for the plan to succeed.
Consider the location, topography, zoning, utilities, and demographics of the area to determine if it would work for your project. Once you buy the property you have to understand all the steps needed to make the build a success. This may include a development feasibility study, a site layout, a marketing strategy, and other steps that would contribute to the success of the project. This also involves building a team of experts you can count on.
You also have to secure enough funding for development and construction. The more times you do this, the better reputation you build with your lender. However, it can be very hard to get the cash for your first project, says Pasqualino Mazza.
Land Banking Is Another Great Commercial Investment Strategy that Pasqualino Mazza Uses
Land banking pays off if you can remain patient. Basically, you buy land outside an urban area that is expanding. Then, you hold the land until the values go up as urban sprawl approaches your parcel. As development moves towards your property, you can work with the developer to build something of value on the property or sell it to a developer for a tidy profit, says Pasqualino Mazza.
These are just a few of the strategies commercial developers use to double or triple their initial investments. Pasqualino Mazza recommends working with a mentor to show you the robes and to share your first commercial development deal. You might end up finding a lifelong business partner, and you can learn from one another as you grow the scope of your business.
Evolution Mentor Inc.
SOURCE: Pat Mazza