In 2009, $110 billion in commercial loans need to be either re-financed or extended. In 2010, $170 billion in commercial loans are coming due. In 2012, $153 billion dollars in commercial loans are due to mature. The problem that you are well-aware of is that banks don’t have the available cash to handle these loans.
The result? Sadly, REOs, foreclosures, short-sales, and fire-sales. The other sad part (but good for you, the investor), is that a good portion of these commercial properties have positive cash-flow, are in good condition, and are in good areas. Never in the history of this nation has commercial property been in such overall turmoil and potential disaster. These opportunities today are not just normal deals, they are generational opportunities, once-in-a-lifetime chances for you to acquire, fix-up, stabilize, and sell commercial property for million dollar profits.
Before we start finding commercial rehab properties, let’s be smart about it. Let’s first learn how to identify apparent signals of a distressed commercial property. That way, our eyes and ears will be keener as we search for those diamonds in the rough.
Signal #1: Poor curb appeal. This is an obvious sign that the property may be a commercial rehab opportunity. These include overgrown landscaping, boarded up windows, fire damage, property line fenced off with a chain-link fence, or an abandoned appearance.
Signal #2: Missed mortgage payments or delinquent property tax.
Signal #3: You see a lot of vacant space or units available for more than 90 days.
Signal #4: A large percentage of the property’s mailboxes are missing names – this indicates vacancies.
Signal #5: You saw it listed for an incredibly low price recently.
Okay, let’s get started searching…
There are basic ways to finding commercial rehab properties: one, look for yourself, and two, hire someone to search for you.
First of all, get in the mode and mindset of looking around and being curious. As you drive around town, keep an eye open (and an open mind) for “distressed-looking” apartment properties. Be curious. Once you find a property, note the address and go to either the tax records online or at the court house to look up the owner’s name and contact info. You can also have a title company do the same for you. Or perhaps www.peoplefinder.com.
Once you have the owner’s name, contact him or her, preferably by phone. If not by phone, then by a short, no-nonsense letter. Maintain an open mind because you never know where the owner is in life personally. They could be ready to sell, ready to retire, have a sickness in the family, it could be a property that was inherited, a break-up in a partnership, you never know.
I have attached an actual investor/owner letter that has been used successfully.
Join the local apartment owner’s association or commercial property owner’s association. These are first steps to getting in the game.