One person’s failed commercial venture could be your opportunity if you’re smart, handy and willing to take a risk on a distressed property. There can be plenty of value in distressed or foreclosed commercial properties, but there are also some risks that you’ll want to be aware of. In today’s blog, we take a closer look at some of the pros and cons of investing in distressed commercial property.
The Pros Of Buying Distressed Commercial Property
Let’s begin by taking a closer look at what draws investors to distressed commercial assets as an investment opportunity. While it’s not always the case, some of the potential advantages of purchasing a distressed commercial property include:
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Cheaper purchase price
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Less competition from other potential buyers
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Capital savings allows you to put more money into the property or business
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Portfolio diversification
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Can be quicker sale if seller wants to move the property quickly
If you’re willing to put in the work or you are familiar with contractors who can quickly improve a distressed asset, you can flip the asset in a matter of months or find a perfect commercial space for your business at a fraction of your original planned cost. Turnkey commercial properties are great, but you’re not only paying for the property, you’re paying for the hard work that was put in to make it ready to go. Distressed or foreclosed properties will require some TLC, but the cost savings can be monumental if you know what you’re doing.
The Cons Of Buying Distressed Property
Of course, there are some risks and potential downsides associated with buying a distressed commercial asset. Some of those potential risks include:
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High costs to get the property/business up and running
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Greater potential for hidden issues
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Greater likelihood of liens and title issues
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Pollution or ground contamination may be more likely
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Harder time securing financing for distressed assets
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Property may not be in a prime location
You can’t control for all of these potential risks, but you certainly can work to manage most of them. The best way to do this is by connecting with a title service firm like Commercial Partners. We can really dig into a property’s past and do all the necessary investigation and surveys during the due diligence period so any potential issues are discovered well in advance of your purchase. And for those issues that can’t always be discovered before a purchase, we can set you up with a title insurance policy that offers a lifetime of coverage for title defects related to your property. Working with a title service company who understands the risks and potential rewards of distressed commercial property investment can minimize your risk and maximize your potential return.
For more information about distressed commercial assets, or for help clearing or investigating a commercial title, reach out to the team at Commercial Partners today at (612) 337-2470.