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Deal sourcing software
for commercial real estate.

Navigating the complex world of commercial real estate (CRE) involves mastering the art and science of deal sourcing.

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Everything you need to know
about deal sourcing software

What is “deal sourcing?”

Deal sourcing refers to the process of identifying, evaluating, and securing investment opportunities. It’s a proactive approach that often involves research, networking, and using software to discover promising deals before they become widely known.

Why is deal sourcing essential?

Deal sourcing is pivotal in acquiring quality assets at competitive prices, ensuring that investors get optimal returns. It’s also a way to maintain a pipeline of opportunities, thus ensuring continuous growth.

How can I source real estate deals?

Deal sourcing can happen through a myriad of channels: referrals, brokers, direct outreach, online platforms, industry events, and increasingly, technology and deal sourcing software designed specifically for the purpose.

Is deal sourcing different in commercial real estate compared to other sectors?

While the principles remain similar, CRE has its nuances. It involves larger transaction values, complex due diligence processes, and often demands deep market insights.

Manage end-to-end deal flow, from sourcing to closing, with Covercy’s deal management & deal sourcing software.

By embedding banking functionality within the investment management platform, Covercy gives commercial real estate GPs a unique way to manage deal flow process and investor communication. Choose from three investment management software packages based on your firm’s needs.

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The nuances of deal sourcing in commercial real estate

In the realm of commercial real estate, deal sourcing is both an art and a science.

Here’s a breakdown of the most common deal sourcing methods:

Networking and Relationships: The real estate industry thrives on relationships. General partners often rely on their networks, including brokers, fellow investors, and industry insiders, to get leads on potential deals. Cultivating and maintaining these relationships is crucial.

Research and Due Diligence: Once a potential deal is identified, it’s imperative to conduct thorough due diligence. This involves evaluating the property’s condition, understanding market trends, assessing the neighborhood and local economy, and running the numbers to ensure the deal is financially viable.

Direct Outreach: Some general partners take a proactive approach by directly reaching out to property owners. This can involve sending letters, making phone calls, or even visiting properties in person.

Brokers: Commercial real estate brokers are often in the know about off-market deals. Building a rapport with them can ensure general partners get first dibs on prime opportunities.

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Deal sourcing
software features

When evaluating deal sourcing software for commercial real estate, look for these essential features that will facilitate strengthening investor relationships & sourcing your next deal:

Comprehensive Database

Access to an expansive database of properties, including off-market assets, ensures you never miss out on a potential deal.

Interactive Dashboards

These allow for a quick assessment of deals, market trends, and property specifics, enabling faster decision-making.

Automated Alerts

Stay ahead of the competition by receiving instant notifications about new deals that match your criteria.

Due Diligence Tools

Deal sourcing software that aids in the due diligence process, from document management to financial modeling, can significantly streamline the acquisition process.

Investor Relationship Management

Building and maintaining investor relationships is key. Platforms that offer CRM tools ensure efficient communication, reporting, and nurturing of investor ties.

Reinvestment Opportunities

The best deal sourcing software solutions provide tools to showcase past successes and upcoming opportunities, making it easier to encourage existing investors to reinvest.

Final Considerations

Deal sourcing is a multi-faceted process that requires a blend of traditional networking, research, and the leveraging of modern technology. For general partners in commercial real estate, mastering the art of deal sourcing is not just beneficial—it’s essential for sustained success and growth in the industry. Whether you’re a seasoned professional or a newbie, understanding the intricacies of deal sourcing and leveraging the right deal sourcing software can set you apart in this competitive landscape.

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Deal Sourcing Risk
Factors for GPs

General Partners (GPs) in the commercial real estate sector, or any investment sphere for that matter, must contend with a myriad of risks when setting deal criteria and evaluating opportunities. While there are numerous potential risk factors, three key ones that GPs should consistently consider include:

Market Risk: This refers to the potential that the entire market, or a specific sector within it, could experience downturns or not perform as expected. Such risks can be influenced by broader economic factors, changes in interest rates, or global events.

When setting deal criteria, GPs must determine the acceptable level of market volatility and how well the investment can withstand broader market downturns. For instance, certain property types might be more resilient during economic downturns, while others could be more susceptible.

GPs should assess the historical performance of similar assets in comparable markets, study market forecasts, and understand factors that could influence the market, such as policy changes or major infrastructural developments.

Asset-Specific Risk: This pertains to potential challenges or problems unique to the specific asset or deal in question. Examples include structural issues with a property, legacy legal disputes, or tenant-related risks.

Deal criteria might set specific thresholds for age of the building, necessary improvements, occupancy rates, or tenant creditworthiness.

Due diligence is paramount here. Comprehensive physical inspections, legal reviews, and tenant assessments can help identify and quantify these risks. Additionally, understanding the local market nuances and having boots-on-the-ground intelligence can provide a clear picture of asset-specific challenges.

Liquidity Risk: Liquidity risk arises from the inability to quickly sell an asset or exit an investment without a substantial loss in value. In real estate, properties are inherently less liquid than stocks or bonds.

GPs need to consider their and their investors’ time horizons and the need for liquidity. The deal criteria might dictate a specific exit strategy or timelines based on these considerations.

It’s essential to analyze the historic liquidity of similar assets in the market, considering factors like average days on market and price reductions. GPs should also assess broader market conditions that could influence liquidity, such as the availability of financing or the health of the economy.

In conclusion, while these three risk factors are paramount, the real estate sector presents a multifaceted risk landscape. GPs should adopt a holistic approach, considering multiple risk dimensions while leveraging expertise, due diligence, and market intelligence to make informed decisions.

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