Real Estate Investing, Made Easier Online

IT wasn’t long ago that finding commercial property, especially for the neophyte investor, meant traveling by car or plane to various sites — with measuring tools, notepads and camera in tow — then pounding the pavement to inspect comparable places, vet tenants or peruse town hall documents. Newspapers and trade publications were also routinely scoured.

A search was only slightly less cumbersome for the more seasoned investor, who typically relied on word of mouth to learn about deals. Information was sometimes safeguarded by investors and brokers and meted out in quid-pro-quo fashion.

“You’d have to get on the phone with everyone you knew and network,” said Leo McDermott, a senior vice president for a commercial real estate brokerage firm in Baltimore, and also an investor, “and basically trade information.”

The reluctance to share freely could be readily understood. “The amount of effort it took to build up adequate market research, and the cost involved, was tremendous,” said Dan Fasulo, a managing director of Real Capital Analytics, which tracks property transactions, and an investor and former broker.

But that was a decade or so ago. Nowadays, investing in commercial real estate is easier and far more transparent. With the help of resources that have emerged online in recent years — from third-party sources and, increasingly, brokers — property buyers can quickly narrow their searches, view sophisticated maps and obtain myriad pieces of data about market conditions, demographics or recent sales and leases, long before they ever set foot in a building. Many Web sites also include international property.

As a result, more deals are easier to accomplish, particularly for small investors. Son Vann, 36, a management consultant from Houston, bought his first property — a 20,000-square-foot warehouse in the southwest part of the city for around 0,000 — over a year ago with the help of LoopNet, the online commercial listing service.

Mr. Vann’s goal was to find an industrial building with a strong capitalization rate — the industry term for the initial rate of return. “You can do a lot of prescreening and basically sort it by cap rate within a certain region,” he said. “Any property listing that falls below your cap rate you don’t have to bother looking at.”

The listing agent for the warehouse that he bought also provided information about cash flow, rents and major expenses like property taxes, and he was able to contrast the numbers with those of comparable properties under consideration.

“They can get so much more information today than just five years ago,” said Thomas P. Byrne, the chief marketing officer at LoopNet. (The most sought-after listings, he said, are buildings with “triple net” leases, in which tenants pay all the continuing operating expenses like taxes and insurance.)

Like others in the field, Mr. Byrne speculates that the next generation of sites will incorporate personal networking structures like MySpace and YouTube. After all, “it is a people business, and our investors want to communicate with one another,” he said. “We’re just in the early stages of thinking how to leverage that.”

Compared with the residential market, however, the commercial real estate industry has lagged behind in making listings and other resources available online to the investing public. (Only about 1 percent of the visits to real estate Web sites, in fact, are to those dedicated to commercial property, according to Hitwise, a company that tracks searches.)

“A lot of firms have had the resources, but have not necessarily done a spectacular job of getting people to come to their sites,” said Warren Bimblick, a senior vice president at Penton Media, which produces free Web publications like National Real Estate Investor and Retail Traffic.

The complexity of the marketplace may be part of the reason. For one thing, commercial properties are valued differently than residential properties: the more revenue a commercial building generates, the more it is worth. The asking price usually has little to do with the prices paid for similar properties. Far more due diligence is required, though gathering material and presenting it in a user-friendly way has proved a major undertaking, given the spectrum of property types and markets.

“It’s a massive logistical operation with significant costs,” said Andrew C. Florance, the founder of the CoStar Group, which also offers commercial listings.

“There were actually lots of companies trying to do this years ago, and the vast majority of those efforts failed,” Mr. Florance explained, pointing to high-profile ventures like Teleres, partly owned by Dow Jones & Company, and Zethus, backed by Goldman Sachs.

CoStar’s extensive database, which appeals to sophisticated investors, has been 20 years in the making and is still growing. From its NASA-like headquarters in Bethesda, Md., the company regularly dispatches an army of more than 1,000 researchers to gather and verify for-sale and for-lease listings across all property types nationwide.