BiggerPockets

Get Off The Fence In 2011 Or Lose Out. What Will You Do?

For years now, real estate has been one of the most profitable and stable investment options. Even though, the overall market is struggling because of the existing downturn in the economy this is still an excellent investment choice. According to the reports in 2010, this industry was off to a bad start when it comes to foreclosures and loan defaults. But, this is showing some improvements as it is now possible for investors to capitalize on solid opportunities and this is expected to increase somewhat in the coming years. If you are a potential investor, now is the time to take advantage of the opportunities in the distressed commercial market.

The general consensus is that we could be looking at one more year of stagnant real estate market in 2011. This basically means that, 2011 is going to mimic 2010 in many ways. As a result, the year to year growth will be very low. Everything is forecasted on the improvement of the national economy and whilet there are indications that things are strengthening slightly, there are still opportunities for investors. Naturally, a great deal will depend on what takes place across the country and even more so in the global economy.

Commercial markets will continue to undergo the ills of reduced vacancy rates, high default rates and low rents. Over the next couple of years, a wave of loan failures in this sector could jeopardize America's fragile economic climate. However, the commercial real estate values have dropped more than 40 % in recent years. The heightened vacancy rates which now range from 8 % for multi-family homes to 18 % for falling rents and office buildings, which have diminished 40 % of the available office space as well as 33 % of the retail space, surely have exerted an ultra powerful downhill decline on these property values.

A substantial influx of mortgage foreclosures for commercial properties could result in economic problems which can affect the lives of virtually any Americans. The empty office buildings, retail stores and hotels could lead to loss of jobs. Property foreclosures on apartment buildings could force families from their homes, even when they are making monthly payments.

According to many experts, the present commercial market is experiencing extensive challenges for two distinctive reasons. For starters, the existing downturn in the economy has triggered a significant deterioration of the fundamentals of this market. As such, the escalating vacancy rates and plummeting rental rates present challenges for all commercial loans. Secondly, the growth of the commercial market bubble contributed to the initiation of a sizeable amount of loans influenced by drastically fragile underwriting specifications.

As it stands, similar to any kind of investment when you hang around with the hope that the market indicators will show a recovery, you will be too late to capitalize on the opportunities. You need to be in a position to foresee what is taking place with the major indications and jump ahead of the other investors.

Real estate consortiums, investment trusts and money managers which include commercial investment funds are currently plunging much-needed funds to acquire the best real estate. These investors have amassed investment capital to purchase real estate debts and rescue distressed property owners by co-sponsoring investments with debt and equity investors looking to maximize their return on their investments. One thing is for sure, it is not as risky as you might think so now is the time to purchase properties with positive cash flow and reap the benefits next year.

Comments

• 

  Nii Okai — over 1 year ago

  You hit the nail on the head, Christian. I will add that a working knowledge of market cycles will greatly improve one's chances of capitalizing on the current downturn. All markets are not the same - it might be a great time to buy in one market, whilst it might not be a good idea to buy in another.