How To Get Commercial Property At Discount Prices
Your options for these types of real estate investments include apartment buildings, storage facilities, mobile home parks, offices and retail stores, shopping centers, or warehouses. The most important consideration when buying commercial real estate is making sure you get positive cash flow every month. This is actually getting easier with the recent changes in the market, again with the big “YES” you are buying well.
Commercial property can be bought at bargain prices Commercial real estate is now available at lower prices and with better rates of return than investors have seen in many years. There are 3 main reasons for this:
1) Bubble Investors Overpaid for Commercial Property – Like single-family homes, eager investors have paid too much in recent years for properties in the hope that prices will continue to rise forever. Now that the market has adjusted, these investors are looking for a way out. Unfortunately for them, the only way out in many cases will be for the asset to go into foreclosure unless the lender is willing to negotiate with the property owner or a potential buyer.
2) Commercial property loans are harder to come by – Now that conditions have changed, lenders are, of course, backing down. Most of today’s lenders are only interested in financing “working” commercial properties. This means that the property is fully rented, except for a small vacancy fee, and that the income from the property covers all expenses, leaving a positive cash flow for the seller as a cushion in case the market weakens. If a commercial property has been poorly managed, or if the vacancy rate has been too high, then most lenders want to see the property successfully renovated and operated for at least one year, and in some cases two full years before. let the lender do it. Consider lending funds secured by real estate.
3) Creative backgrounds can be used, but most brokers don’t get it. – Sellers who have to sell in this market may need to be open to creative financing, but most trading brokers only have experience in structuring conventional transactions. This means that if the real estate property has been poorly managed, or has a high vacancy rate, then no matter how hard the broker tries to sell the property, if it relies solely on conventional financing, then the probability of achieving a successful closing is bleak.
These three factors are creating opportunities for investors who understand how to approach commercial brokers on creative financing for commercial assets, and who realize that in this market they can conduct unconventional transactions using methods such as Master Lease Option, Owner Carry Financing, and purchase with existing financing. Once you understand these ideas, you can build your commercial property portfolio right now during the real estate downturn instead of waiting for lenders to start lending again.
This gives you the opportunity to acquire commercial property at a time when prices are favorable and, because conventional loans are not readily available, sellers and brokers are much more open to buying with creative financing methods.