Book Review > Commercial Real Estate Investing - A creative guide to successfully making money

Dolf de Roos is a self made real estate investor, workshop presenter and prolific author on the subject whose passion for the subject comes through his writing. The book is enjoyable reading and often uses amusing anecdotes to demonstrate a point.

In Commercial Real Estate Investing Dolf sets out to explain the benefits of building your lifestyle around investing in commercial real estate. I say building a lifestyle because this book is a combination of facts and tips about commercial real estate, blended with an approach that, in line with the best motivational speakers, exhorts one to “get away from the TV” and live life to the fullest by surrounding yourself with real estate investors “who are in general a pretty motivated, excitable, and exciting bunch of people to hang with.”

The book begins “If you think commercial real estate is just like residential real estate except that you need more capital to get started, you are in for a surprise”.

The first chapters set out to explain the advantages commercial real estate has over residential real estate. These advantages are largely based on the nature of the differences in lease conditions. Commercial leases are generally longer, have automatic annual rent increases and the tenant is responsible for meeting the ongoing costs of operating the building. These differences are explained in detail.

The book then sets out to debunk what Dolf feels are the two myths associated with commercial real estate, namely that tenants are hard to find and that banks have a lower loan to value (LTV) ratio for commercial real estate, meaning one needs a greater initial stake.

To debunk these myths Dolf introduces a strategy based on the fact that commercial real estates’ capital value is pegged to the rental return via the capitalization rate (cap rate). Broadly speaking he gains an instant increase in capital value by finding a tenant prior to, or at least simultaneously with, buying an untenanted or under tenanted property.

Dolf uses plenty of examples from his own portfolio in explaining the strategy and covers many types of commercial real estate from automated car parking systems and advertising signs to funeral parlours, office buildings, aircraft hangars and warehouses.

One learns about how to leverage a property’s value through such tactics as making the most of roof space, airspace rights, mineral rights, renovations and remodeling, splitting or combining existing leases and a range of others.

Dolf explains, by using examples extrapolatable to other situations, how to find tenants before buying buildings or how to make buildings more attractive to prospective tenants.

An example is an interesting ploy he used in relation to finding a tenant for a warehouse. Dolf recounts the time he remodeled the warehouse manager’s office to make it very plush, on the basis that the manager is usually the person who will decide on which property to lease. He then invited managers of nearby warehouses to visit the warehouse, explaining that the digital widescreen on the office wall was great for showing training videos to the staff. He quickly found a tenant to move in.

The book contains a myriad of other tips, often with examples from his own experiences, from developing and presenting a proposal for finance through how to negotiate leases (and common mistakes to avoid) to ensuring a tradesman will drop everything to attend to your buildings.

He demonstrates the need to carry out thorough due diligence with an amusing story of how Count Victor Lustig sold the Eiffel Tower twice to unsuspecting scrap dealers.

The final chapters move into real estate development and outline Dolf’s recent moves into large scale property development without much detail, although interesting enough in displaying what is possible.

Finally Dolf brings it all together in chapter 21 where he publishes his thirteen golden rules for investing in commercial real estate.

Commercial Real Estate Investing is written by a skillful, passionate evangelist for commercial property and may come across as a bit over optimistic by glossing over the negatives and certainly not writing about any negative experiences, he must most surely have had, given his large portfolio and extensive experience in the game.

Not withstanding this, I read the book from the vantage of an investor with a small residential property portfolio and no exposure to commercial real estate. From this vantage I recommend the book. It has given me a base understanding of how the industry works and what I need to at least be cognizant of in looking at any potential deals.

It would, I imagine, also be useful to those who have a commercial property or two and wish to make the most of those or increase their portfolio, although like me, not everyone wants to become a living, breathing, card carrying , 24 hour a day commercial real estate investor. Experienced commercial real estate practitioners may find it a bit over simplified.

Jeff Manitzky is a member of the AIA.