Turning Distressed Commercial Properties into a New Business

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There are many reasons right now for real estate investors to be hanging their heads low and kicking a can while bemoaning the state of the economy and especially the real estate market. However, where one man sees chaos and the end of days another man sees opportunity in disguise. The serious real estate investor and entrepreneur should ignore 90% of the bad news he reads about the stock market, real estate and the overall economy. Instead, the investor should be forging a plan to figure out how to establish a profitable venture amidst a new business landscape.

The investor needs to carefully separate the facts from the fiction in the news by closely examining the data that is available and drawing his own conclusions. For example, many experts believe that the true unemployment level in the U.S. is close to 10%. It is easy to concentrate on this 10% figure and imagine all of the listless unemployed wandering the streets and dragging down the economy with them. However, it is much more productive to concentrate on the 90% of people who are employed and try to forge a business that will allow you to serve them and their needs under these new economic conditions.

Here is a link to a company in Minneapolis that is “Turning Pain to Profits” by offering management and investment services that concentrate on distressed commercial. I find their definition of distressed real estate very interesting. William Griffin, president of CBC Griffin Realty said that “distressed assets can be defined as those falling short of original investor expectations because of management problems, defaults, debt obligations or valuation changes.” This broad definition of distressed property can lead investors to profitable new opportunities in commercial real estate that they might not have considered in the past. In other words, there are many opportunities out there for investors in addition to properties that are already in foreclosure.

These opportunities are so large that this enterprising real estate investment company dedicated an entire new division to helping investors find and maximize their returns on these properties. Instead of hanging their head low and kicking a can this company decided to serve a new class of investors and expand their operations. Many other companies would have been scared to do anything knowing that in 2008 “foreclosures on commercial-industrial properties rose 60 percent, while foreclosures on apartment buildings increased 16 percent.”

Investors everywhere should be looking at the real estate market right now with fresh eyes to determine how they can best serve the needs of a changed market. Similar opportunities are present in most metropolitan areas in the U.S. and those investors and entrepreneurs who have the gumption and foresight necessary to extract the gold from dross will be the leaders in the decade to come.

Photo Credit: Dave mcmt

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5 Comments

  1. Hi Dave,

    Thanks for the info. This company and companies like it are probably about to get a fresh batch of clients. The new commercial real estate investing course by Jason Gilbert called “Commercial Millions” just launched. This course focuses one investing strategy on working specifically with these “distressed” properties, fixing the management and/or marketing issues and cashing in with a number of exit strategies.

    Thanks and have a great day!
    Mark

  2. There are a lot more distressed owners out there right now than truely distressed properties. Just like lots of residential owners can be in distress … even though the house is quite nice … many Commercial Owners need to sell and yet their properties don’t need much of a tune up to cash flow nicely.

    Add to this the notching down of sales prices and you can actually reset the profit meter on many Commercial Projects when you buy them at the discounted prices we will see in late 2009.

    Just waiting for the credit markets to loosen a little.

    My two cents.

  3. Well done informative but I have to say not all markets are distressed. In our market, in Madison, Wisconsin, home of U of W, State Government and County seat as well as heavy Biotech distressed is not a apt description. A bit sluggish but steady with still nice CAP investments. The old adage, “location location location” Investors need to look beyond their own backyards. Thanks and keep informing

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