A commercial foreclosure is often much less complicated than a residential foreclosure. In addition lenders tend to be less likely to work with the buyer in an attempt to modify or bring the mortgage up to date. This means that commercial property that has gone into foreclosure is available at a very low price and often through public auctions. As an investment commercial foreclosures are a good option, however you do need to understand the risks and possible pitfalls of these types of holdings.
Purchasing from the Lender
If you have connections with a bank, financial institute or mortgage lender you may be able to work directly with that company to find out what commercial properties are being foreclosed on. Keep in mind that the lender is going to try to get the best possible price on the foreclosure, however if you are a current customer with them in good financial standing this can be a strong point in your favor. With advanced notice of properties going into foreclosure in specific areas you can target your investments and select the areas you know will be easy to rent or resell.
Loans from the Small Business Administration
As a small business you may qualify for a loan from the SBA or Small Business Administration for investment in commercial real estate. This is true if you are a current small business or if you are purchasing the real estate to actually start your first business. Since these loans require considerable documentation and you must meet qualification criteria working with your attorney and accountant to complete the forms is highly recommended.
Is it a Good Investment to Buy?
Determining if a particular commercial property is a good investment in the real world as well as on paper isn't always easy or simple. Buying means that you are the landlord, responsible for repairs, maintenance, taxes, insurance and other costs, which needs to be considered in short and long term budgeting. In addition to the actual cost of the building or property you will need to consider closing costs, inspections, current repairs and even back taxes in many foreclosures.
Real Estate Law is Complicated
Having an experienced commercial real estate attorney review the offer to purchase and assist in negotiating the deal makes good financial sense. Without legal assistance you may be leaving money on the table when you close and you may find out the cost of buying the foreclosure is much higher than you thought.
