One man’s trash is another man’s treasure, and that’s oftentimes the belief when we talk with clients who are interested in purchasing distressed commercial property. A distressed commercial asset is causing problems for its current owner, but you may have the right tools to turn an upside-down asset into a thriving part of your portfolio. As you can imagine, there are plenty of processes you’ll want to undertake with caution when buying distressed commercial property, and in today’s blog, we’re going to talk more about what you’ll want to know before you close on a distressed asset.
What Is A Distressed Asset?
A distressed property is an asset that is underperforming in one or more ways:
- Physically - A physically distressed asset may have a crumbling foundation, broken windows or other issues that would prove quite costly to fix. If the property owner doesn’t have the funds to address the physical issues, they are only likely to worsen, further distressing the asset.
- Financially - What may appear to be a thriving business on the surface may actually be a distressed asset due to the financial situation lurking below the surface. The business may be bringing in $100,000 a month in revenue, but if expenditures constantly exceed revenue, the asset would be considered distressed. A business that is hemorrhaging money would be considered a financially distressed asset.
- Personally - Sometimes personal issues or behind the scenes problems with business partners or ex spouses can cause a property to be considered distressed. Legal issues with a property can distress a once viable business, which may make the owner want to sell and put the mess behind them.
Purchasing Distressed Property
When done correctly, adding distressed property to your portfolio can be incredibly lucrative. Conversely, knowingly taking on a property with baggage will undoubtedly present its own challenges, so don’t expect it to instantly become a valuable asset. Your smartest play when considering purchasing distressed property is to connect with a title services team like Commercial Partners.
We can thoroughly investigate a property’s title and ensure all inspections are performed so that you understand the full extent to which the property is distressed. The more you know about a property, the more leverage you’ll have during negotiations, and you’ll be able to avoid unwelcome surprises.
Distressed properties are more likely to have bigger problems under the surface, which is why it’s essential to have a title services team by your side so these concerns don’t become your problem once you’ve closed. You’ll have enough on your plate trying to turn a distressed asset into a revenue-producing part of your portfolio without hidden surprises popping up along the way, so bring a team of title professionals along the way to help bring your vision to life. For more information about how we can assist with the acquisition of distressed or foreclosed commercial property, reach out to the team at Commercial Partners today at (612) 337-2470.