The number of distressed commercial properties in the US has increased in the last two years or so. With the sheer number of these properties available, investors will have no trouble finding commercial structures they can purchase to launch a real estate venture. It’s determining whether or not a certain commercial property is worth the investment that will really pose a problem, especially for inexperienced investors.
Buy for the right price
For an investor, office and apartment buildings and shopping centers can be good investment options. But first, they need to find properties like these that are priced below market value. Consulting online foreclosure listings, business newspapers, and public notices will help.
The idea behind finding the lowest price possible is to have extra money to spend on renovations, since most of these properties require repairs. Rental buildings that do not offer enough income to owners or banks to cover operating expenses and debt are good options, as owners are more likely to sell them quickly and are more willing to accept a lower offer.
Financing Strategies
Investors planning to purchase distressed commercial properties should have enough equity to cover a down payment of 20 to 30 percent of the total sales price. If the property is purchased through auction, the buyer must have a check ready for the down payment at the time the property is declared sold. After that, the buyer will have 24 hours to come up with the money that will cover the full sale price. It goes without saying that buying a building will not be like buying a house; the cost can reach millions of dollars, not just millions of thousands.
other concerns
Buyers also have to worry about the condition of the property. When inspecting it, focus on financial, structural, and environmental aspects that could pose problems later. Also, make sure that the city where the property is located allows modifications or updates. It would be prudent to know the rules that govern renovations in the particular city where the building is located, as those rules vary from place to place.
Buying distressed commercial property is more complicated and more expensive than buying distressed homes. Seeking legal and professional advice and planning ahead before making any purchase will go a long way towards a successful transaction.