How To Find & Buy Distressed Commercial Properties

when you're just getting started in commercial real estate distressed commercial properties are a pretty attractive investment route because they're typically cheaper than just about anything else you can find out there I'm going to show you how to find distressed commercial properties and we'll talk through whether they're actually worth investing in or not so there are several ways that you can actually find distressed commercial properties one of the easiest ways is to go on to krexy.com which is a commercial real estate MLS equivalent there's actually no single listing source of commercial real estate properties online but this is one of the easiest ones to find foreclosures so you just go into the main page type in the keyword foreclosure and it's going to pull up an entire list of properties across the country that are under a foreclosure sale or maybe experiencing some sort of bankruptcy or distress on the property foreclosures are typically properties in distress because those owners are set to lose their properties so these are a pretty good opportunity for you if you have the cash to step in and work out a deal you can either buy it directly from the bank if they've already taken the Foreclosure back or you could negotiate something with the seller to where you come in and maybe do a subject too where you pay off their loan or you just assume they're loan and take over the payments there let's look at a couple of these now you'll notice that a lot of them on cruxy are unpriced and that's likely because they're going to auction most banks will try and auction these properties off at the highest price possible so that they can at least attempt to recoup some of their funds but here is a 60 unit apartment complex that is available for 1.5 million so let's dive into this one and just check it out so we can see here it's a C-Class multi-family property 34.44 cents a square foot which is really really cheap I mean it would probably cost you 150 to 200 a foot just to build it back today now you'll notice that the occupancy is at 30 percent now that says to me that there's either something really wrong with the building or the previous owners just didn't do their jobs right now I can see from the photo here it looks like they may be in need of new roofs it's a two-story brick complex with a what looks like a cement parking lot doesn't look all that bad okay so you'll notice that there's not a lot of photos for us to dive into which means that the next step would be to reach out to the real estate agent that is on this listing see if they have anything else and see what other information that we can find now scrolling a little bit further down it does look like this is a bank owned foreclosure it is a foreclosure sale that is starting bid at 1.5 million and it will be as is where is so they will not accept any offers on the front end so kind of like I was saying earlier a lot of these foreclosures and maybe this is a residential real estate thing too but especially on the commercial side a lot of these will be going to auction so there is a chance that you could be the sole bidder to show up and bid 1.5 million and get this but then you have to adhere to the auction terms which tend to keep a lot of investors away from buying distressed properties because you have to put 10 down almost immediately and then you're expected to close within I believe 30 days it depends on the auction now there aren't a whole lot of investors out there that are capable of doing that which is why this can be a very difficult method of investing in commercial real estate sometimes so one of the other nice things that you can do with Craig's is actually do this by map so maybe there's not going to be any commercial properties that are under foreclosure or in distress in your area but you might be able to find something nearby so when you click on the map we can see you know I'm in Nashville so we'll go look at one in Asheville looks like it's a piece of land probably not something that I'm going to be too interested in because again with the terms of an auction which is typically what this is I don't want to put down that much cash on a non-income producing property Okay so we've looked at foreclosures let's just search for distressed oftentimes the Brokers whenever they list these properties will put keywords into the listing and this search will allow you to go find them toggle the map off so I can see everything and there's a handful of properties here that are under distress let's go look at this hotel it's two and a half million dollars fifty dollars a square foot again that's pretty cheap it's a Days Inn flagged hotel five stories 100 rooms Waterfront Hotel and the Heart of downtown Oil City Pennsylvania I was gonna say it looks like it might be open and operating but it says distressed and vacant there's nothing going on there so it looks like here I mean this could be a pretty good opportunity for somebody that wanted to come in and do a full renovation on a property it looks like it's a little bit older so at the very least you're probably going to be updating the Cosmetics of the property but it doesn't look to be in the worst shape in the world I mean for a vacant distressed property this seems like a pretty good opportunity now one thing you've always got to ask yourself when you're digging into distressed commercial properties why are they distressed that's one of the first questions that I will ask either the broker or the seller depending on whom I'm talking to is it an issue with cash flow and they can't repair the building is it an issue with operations because sometimes you'll find a distressed property that you know maybe they just had a bad manager and they don't have the ability to fill the rooms and now they don't have cash flow to fix anything up and it's just this kind of downward spiral but sometimes there will be actual reasons that you cannot overcome as an investor that may be a pretty good reason to stay away from a distressed property such as it being just in a bad area or the zoning has recently changed and you can't really do all the renovations and updates for the type of use that you need there so very important that you do your due diligence especially really on distressed commercial properties I would start looking at a project like this and seeing how much it would cost to convert it into a multi-family property now you will encounter some issues there with maybe the zoning doesn't allow multi-family currently but a lot of municipalities are fine converting something that's heavier commercial use like a hotel into affordable housing or some type of multi-family use because it helps with their tax basis and also with all the housing issues that almost every city in America is facing right now now another way that you can find distressed commercial properties is just through bank owned REO you can basically Google that come on here and find any number of different groups I mean let's just click on Bank of America they've got foreclosed homes for sale you might be able to actually type in commercial real estate on some of these and find some commercial properties so it's pretty easy to do this research from the comfort of your house but finding distressed commercial properties in my experience is a lot easier by just hauling the bank and asking for whoever is in charge of their Bank real estate owned properties typically Banks don't like to take properties back they are not in the game of Real Estate ownership and investment they just want to lend you the money on it so when they have to take a property back they're trying to offload it as quickly as possible okay so we discussed finding distressed commercial properties through an online listing platform such as cruxy reaching out to your local bank really the final and best way aside from sending out mailers and finding legal notices online which you can of course do but it does take some time and effort is to talk to a commercial real estate brokerage there are Brokers that are in with these Banks and in with property owners that are taking back these distressed commercial properties and doing everything that they can to get them either sold for the owner before they go to foreclosure or they're working with the bank to offload them off of their books either way finding distressed commercial properties is a great way to get started it does have its downsides though because there will be a lot of Renovations needed there could be some operational issues with the property depending on what kind of asset that you need and it may take more expertise in commercial real estate investing than a beginner may have so always find a partner that knows what they're doing see if you can partner with them on your Ventures and that's how you find distressed commercial properties

Channel: Tyler Cauble

Views: 14,963

Keywords: commercial real estate, commercial real estate investing, real estate investing, buying commercial real estate, passive income, passive investments, distressed commercial real estate, how to find distressed commercial property, distressed commerical property, commercial real estate for beginners, how to buy distressed commercial property, how to buy distressed commerical property, real estate investing strategies, distressed commercial property, buy distressed real estate

Id: gsRVyCsaJpw

Length: 7min 48sec (468 seconds)

Published: Sun Aug 20 2023