With the relentless drumbeat of negative market news and the current credit crunch, you might be thinking now is not a good time to be buying commercial properties.
It certainly is NOT a good time for Indirect Investments in Real Estate ... such as stock in publicly traded builders ... or REIT's.
I am talking about the Direct Ownership of Commercial Property either as a project sponsor or an investor with part ownership of a Commercial Property.
Now is still a very good time to buy and hold Commercial Property ... especially in certain markets and Asset Types.
Here is the word on the street...
These negative market forces have actually made this one of the best times to continue to acquire commercial properties and build your portfolio.
Here are 4 Reasons why.
1) Uptick in Commercial Foreclosures
For the last couple of years the Commercial Property market has seen nearly as much speculative buying as the Residential side.
In the niche of properties priced at less than $10M - the segment dominated by non-institutional buyers - many people have overpaid for their properties. And the banks went along with them.
Many owners now find them selves over-leveraged and we are seeing an increase in Commercial Property Foreclosures. This is a bargain hunter's dream
2) A Return to Rational Prices
The current credit crunch has positive effects. Those same speculative buyers and easy financing are now way gone. With financing MUCH more difficult these days and the speculators out of the picture, asking prices have come down to reasonable levels we haven't seen in nearly a year.
3) Flexible Sellers
Sellers know the lenders are only funding solid deals that are well priced. We are seeing sellers be MUCH more flexible on negotiations both at contract and retrade stages of the purchase.
And with the Speculative Buyers out of the market Sellers are seeing fewer offers as well. They are very hesitant to let your contract go if you are a serious buyer and much more flexible at the bargaining table.
4) Only Solid Profitable Deals Allowed
In fact, lender underwriting right now is so conservative that only solid grade "A", profitable deals will get funded. Now is a great time to build your portfolio because, if you can get a property funded in this market, you are going to have a screaming profit machine when the market turns back up again.
Get 'er done...
Now is actually a great time to establish a reputation as someone who can get a deal done even in a tough market. This will go a long way down the road to establishing good relations with institutional funding sources when you need them in the future.
So as you see the head lines day-after-day touting the bad news in the financial market, remember this . . .
Right Now is a great time to continue to look for good values in the Commercial Property markets and if they're underwritten now in a way that the banks will fund, you're going to have a great project down the road.
