| In commercial real estate, there are many different | | | | property may be a money generating machine once |
| strategies in which to pursue investments. A very | | | | more! You can even call on brokers to locate and |
| popular strategy that even the most astute of | | | | bring you properties with problems that fit your |
| investors use is rehabbing old or distressed properties. | | | | targeted criteria. This strategy of finding distressed |
| It is a widely used strategy because there are many | | | | properties is a great one, as you can very quickly cut |
| properties in need of some help, and anyone can do it! | | | | through the many listings that do not fit your criteria. |
| A little vision and patience, and the once distressed | | | | Now that you have identified a few ways to locate |
| property will become a beautiful, money generating | | | | distressed properties, let's look at the characteristics of |
| machine. | | | | distressed properties. |
| And, after all, that is what every investor wants in a | | | | A distressed property may have: |
| well operating property. | | | | · high vacancy rates |
| This strategy can take an old, run down building and | | | | · below market rents |
| completely renovate it, therefore creating value that | | | | · poor management |
| previously was overlooked. It can also help out a | | | | · old, run-down condition |
| distressed owner who, for one reason or another, can | | | | · poor common areas |
| no longer maintain or care for the property. These | | | | · no amenities |
| properties can increase in value greatly with jut a little | | | | · low net operating income (NOI) |
| focus, maintenance, and the implementation of a solid | | | | A distressed owner may: |
| management team. | | | | · be too old to maintain the property |
| Distressed properties are identified by some sort of | | | | · have inherited the property and doesn't want |
| problem. This problem generally resides with two | | | | the hassle |
| aspects of the property: either the property itself or | | | | · cannot pay the mortgage |
| the owner. The problem can be simple, like a high | | | | · be facing foreclosure |
| vacancy rate of an apartment complex, or something | | | | · be in bankruptcy |
| much larger like the possibility of a property going into | | | | · be going through a divorce |
| foreclosure because the owner cannot make the | | | | The list of problems can literally go on and on. There |
| mortgage payments on time. This can ultimately ruin a | | | | may be problems specific to a property or owner that |
| person's credit if a property is to go into foreclosure. | | | | may not be as common as the ones listed here. |
| So how do you identify these distressed properties? | | | | If you are not currently working with distressed |
| One way is to drive around your community looking | | | | properties, I encourage you to check it out. It can be a |
| for buildings that look vacant, run down, not fully leased, | | | | great way to purchase a potentially awesome |
| and those that display for sale by owner (FSBO) signs. | | | | property very inexpensively, rather than making a |
| If a property looks like a sore thumb in a nice area, | | | | purchase of a profitable property at a premium retail |
| then that is a flag that there might be something | | | | price. Purchasing a distressed property can get your |
| wrong. You can go to the county, find out who owns | | | | foot in the door of the commercial real estate industry, |
| these buildings and send out a letter campaign telling | | | | and it can also supply you with an outstanding passive |
| them you wish to purchase the property. Many deals | | | | income for years to come. |
| can develop this way, and you can get great prices on | | | | Modest repairs, marketing, a change in the |
| properties you didn't even know would be for sale. | | | | management team, a few added amenities, a change |
| Another way to find distressed properties is to call | | | | in the leasing agreement, rents brought up to market |
| brokers on listings you find on the internet and simply | | | | level, filling vacancies and lowering expenses are all |
| ask why the owner is selling. You may have to call on | | | | ways to increase value in these distressed properties. |
| quite a few properties, but eventually you will find that | | | | These simple strategic moves can turn your now |
| gold mine property being offered way below the | | | | dumpy building into a current market retail property in |
| market rate. With just a few changes that distressed | | | | which a retail investor would definitely be interested. |