Commercial property values are ready to crash - offices, shopping centers, hotels and warehouses. The crash is already beginning, but rather than have more insolvent banks, the U.S. government for now is allowing them to "extend and pretend."
This means the banks let the current investors keep the properties for now, even though they're making little or no payments on their loans. The banks pretend those loans are still good and don't foreclose.
But to make matters worse, many owners are also defaulting on their property taxes forcing the lenders to pay them rather than have local governments foreclose. Some of those owners aren't paying for building maintenance or insurance either, once again a cost the lenders must bear as they sink ever deeper into these properties.
When commercial properties do crash, even if you're not rich, here is how you can invest in them and potentially make a very high return on your money.
As the crash happens, hedge funds and other investor groups will swoop in and buy these properties from the lenders, at deep discounts, sometimes even for pennies on the dollar. But to avoid heavy debt payments and keep rental prices low to fill the properties with good tenants, investors will need to pay cash.
That's where you come in, if you have as little as a few thousand dollars to invest. Some of these investor groups will be raising money from many small investors and this means you can be very selective as to which one is right for you. In making your decision, please do the following:
- Check the track record of the company raising the money and the people involved. Have they defaulted on their obligations or made poor investments in the past? Know who you are doing business with and their track record. Ponzi schemes are run based upon people being too busy to do their homework.
- How will they manage the properties once they buy them? Investors can make a tremendous buy and then lose their shirts mismanaging the property. Find out who will manage the properties, their track record and what their vested interest is in having them run well.
- Check the fee structure. You can make a great buy on property, bring in a top notch manager and then get eaten alive by fees. The managing partners and other organizers make big money, while you get a very small return on your investment. As the risks are shared, so should be the rewards.
- Transparency. A well respected accounting firm should regularly issue financials and they should be easily available to you. If you're not financially sophisticated, you can hire a CPA for a few hours who is, any time you choose.
- Liquidity. How can you sell your investment if you need to? What market exists for it? If you must hold for a certain number of years, you should know that up front.
- Dividends. What is the dividend policy? Will you receive periodic payouts?
Commercial real estate opportunities will be plentiful. But take the time to choose wisely and you'll enjoy peace of mind doing business with the right people to meet your objectives.
Dick
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