Is Investing in Commercial Real Estate Smart?

Tim and Mike came from different sides of the train tracks. Tim was brought up in the suburbs with two supportive parents. He had many advantages in life and not surprisingly had been successful from childhood, to teenage years, and as a young adult. Mike came from a broken home. His parents were in and out of his life and he constantly was being uprooted. There were negative influences around Mike, yet he stayed focused and was able to get out of what could easily have been a bad situation.

Tim met Mike in college and it did not seem like they had a lot in common. However, their passion and drive to succeed bound them together. Plus, it helped that they had a lot of the same classes. During their freshman year, they partnered on a project where they created a business model for a mock company. They didn’t know it at the time, but this would foreshadow a long-term relationship.

In the class, Tim advocated for slow but steady growth of the company including a plan to move out of rented office space and invest in commercial real estate over a 10-year period. Mike believed that renting from the start would siphon profits and as a second venture, along with the business they were creating, they should immediately find commercial real estate to invest in.

Neither Tim nor Mike was right or wrong about the better proposal, but they fought about it constantly. Mike won out, and when they presented their study to the class, it was the only one among almost 50 students that involved a two-tier plan to buy commercial real estate, and start a company simultaneously. The professor did not say whether she liked or disliked the idea, but because their presentation, paper, and plan were well researched and reasoned, they got very good grades.

Skip forward eight years, and fiction becomes reality. Tim and Mike are older and more mature, and both recently have earned their MBAs. They are discussing job prospects and the idea of becoming partners and starting their own business comes up. Both are intrigued, though Tim is a bit gun shy. After a series of long discussions, they decide to see if they can work together and start a profitable venture.

As if they were still in class, Tim starts talking about working from a home office, or renting some space, and Mike wants to invest in commercial real estate in addition opening a business. They make the decision that they will take on different roles at the company. Tim will be in business development, devoting all of his time to the company. Mike will head up the commercial real estate side of things, focusing on locations, costs, and all of the dollars and cents involved in owning property.

It’s hard to say if Tim and Mike are going to be successful. After three months Tim’s plans are coming along, and Mike is still doing his research and studying various sites. They are optimistic, and excited to be working together. From two different backgrounds, they bring different perspectives, and that can be healthy.