“Taking Advantage of the Current Economic Climate”
This quote is attributed to the famous poet Anais Nin who probably was referring to self-actualization as opposed to accruing a fortune, but it’s akin to a universal principle in life… that “The greater the risk; the greater the profit.”
There lurks a prevailing attitude in the marketplace that the “other shoe” is about to drop in Commercial Real Estate; that the Commercial Real Estate Market is about to collapse under the stress of the commercial loans coming due. There’s an anticipation that property values will continue to decline as business interests consolidate and fuel vacancies.
It’s important to take a step back from the “Chicken Little Mentality” and apply some critical thinking. What aspect of Commercial Real Estate are “they” referring to? Commercial Real Estate is a Broad Umbrella Term for a host of real estate investment products; almost anything that isn’t a single family home.
Commercial Real Estate includes Apartment Buildings, Office and Medical Buildings, Land (all kinds of commercial development opportunities), Agricultural Land, Mobile Home Parks, Retail Centers, Warehouses, Industrial Buildings, Self Storage Facilities, and NNN Leased Investments just to highlight the most common product types. There are investors out there searching for Apartment Buildings and Mobile Home Parks in strategic areas because these investments have taken advantage of the housing need fed by the rash of single family foreclosures.
You can see where I am going with this. It is simply inaccurate and short sided to group all these different investment categories into one lump sum, and make a broad assumption about the potential of Commercial Investment Opportunities. It may be time to recognize that new opportunities are morphing in this evolving existing economic landscape.
Many prudent investors are stuck on the sidelines making 1% returns on their equity waiting to react to financial indicators to signal a time to jump in again when the time is right. The cliche of is the glass “have full or half empty?” is cliche is for a reason.
There are some indicators out there that are telling us the proverbial “shoe” may have already dropped.
Orders to U.S Factories rose 1.3% in March according to the Commerce Dept. (A decline had been expected), and this widespread activity offset a steep drop in commercial aircraft. Previously occupied homes sales rose 21% from a year earlier, and MasterCard Inc. said its first quarter profits in 2010 jumped 24 %. Banks appear to be delaying foreclosures, and starting more concentrated efforts to create work-out programs for clients; both residential and commercial.
The cultural phenom of “Buy and Flip” continues strong as small and large investors gobble up the home residue of the sub-prime loan antics, which is continuing to drive up the median price of homes in many areas.
Yet Investors continue to hold their cash in lackluster vehicles that are barely returning 1-1.5%; at the expense of missing out on outstanding income properties.
Cap Rates are higher than they have been in 20 years; easily 7-8 % (or more) for strong/positive tenant credit; in growing demographic areas of the country. Interest rates remain low and reasonable. Many Owners are willing to be creative to sell their properties. Banks have a lot inventory to sell, and are open to creative work-out deals themselves to both gluts of inventory.
Some Analysts are cautiously signaling the beginning of an economic recovery, and it may be time to consider researching and uncovering opportunistic values. Now is a good time.
Now is a good time to begin to explore the numerous incomes producing investment opportunities that are on the market. Begin to consider taking advantage of the inventory, creative financing, and income opportunities. The market will recover, and there’s a window of opportunity to jump ahead of the fray… Taking time to investigate and decipher the income potential could reap handsome financial rewards. Your chance for potent equity appreciation and exceptional cash-flow is the best it’s been in years. Opportunities are plentiful now for those with the courage to take action.