3 Critical Considerations Before You Renew Your Industrial Lease0

Posted by Thomas Miller, CCIM

miller-industria-properties-warehouse-classificationsSigning a lease on an apartment may help entrepreneurs feel prepared for the industrial lease process, but the experiences are vastly different. And because a bad lease is like a slow leak – in the sense that it may be minor at first, but over time, it’s going to cause big problems – anyone considering industrial space would be well served by not forging ahead alone. That’s true whether you’re considering your first lease or your second, which actually tends to be the one that makes or breaks a business. A lease is a binding legal contract, so ask yourself whether you truly have the experience and knowledge to be completely clear on everything it entails. Whether or not you decide to find someone to guide you during this process – and we strongly recommend you do – here are three critical considerations before you renew your industrial lease.Read more →

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Commercial Real Estate Myths – Distressed Properties are Good Value0

Posted by Thomas Miller, CCIM

This is part of our ongoing series that debunks commercial real estate myths.

Myth #2: “Distressed properties are cheaper and easier to buy than those offered by a seller who’s under no particular pressure to sell.”

distressedproeprtiesIt may seem logical, but this train of thought derails pretty quickly. Here are three truths about distressed properties:

1.      Distressed sales often take much longer than normal sales to close – if they close at all. 

Chalk it up to difficult lenders – be it a lack of communication or sheer incompetence – but it typically takes many months to get approval on distressed properties. And in the end, a buyer may lose out on the property anyway, as well as any number of other opportunities that were missed as a result of holding out for this “good deal.” When you’re buying a foreclosure from a bank or dealing with a lender on a short sale, you can’t expect logical, rational or remotely timely decisions. Banks work on their own set of rules and have their own priorities. They make decisions based on the financials at the moment and usually don’t consider the future costs of a delayed sale or the condition of the property.

2.      Distressed sales are far more difficult to successfully close.

Even the most straightforward real estate transaction has complex aspects, and it’s the job of your real estate professional to help you navigate through the twists and turns, insulate you against surprises and do what he or she can to significantly streamline the process. When you’re dealing with a distressed property, lenders commonly bring an entirely new set of timelines into play. In many instances, just when it seems like progress is being made, we’re suddenly handed a new timeframe that throws the whole transaction into a tailspin – and that’s never a good thing.

3.      Distressed properties can often be in far worse shape than they appear thanks to their time of vacancy.

In many instances, the degree of distress to a property during its time of vacancy can be quite substantial. What’s more, it may not be easily discovered until the property is reoccupied and in full use again. Inexplicably, most lenders do not maintain any supervision over distressed properties – and they certainly do no maintenance. We’ve seen properties go through freezing winters with no heat in the building, resulting in split water pipes that only show up when the utilities are reactivated. We’ve seen landscaping go long periods with no watering, resulting in stressed plants that die after new owners take possession. Real estate that goes unattended for long periods can negatively impact the longevity of costly building systems, adversely affecting the new owners after a sale is closed. Unfortunately, trying to quantify the damages done by long periods of vacancy and lack of maintenance is challenging.

So what’s the bottom line when it comes to the true value of distressed properties? While some foreclosed properties may yield a viable and valuable purchase to the fortunate and savvy investor, that’s definitely the exception and not the rule. In this case, the sage advice of “Let the Buyer Beware” certainly holds true for distressed and/or foreclosed real estate.

Interested in more debunked real estate myths? Join our mailing list (just enter your email address in the green box to the right) to stay in the commercial real estate loop, and read our first debunked commercial real estate myth, “Why You Need an Agent.” If you have a specific question, fire away in the comments or contact us today.

Our posts are intended to educate commercial real estate users so they can make better decisions in their real estate use, investments, buying and selling. We encourage your input and commentary. If you are enjoying these posts and finding them useful, help spread the word via Facebook, Twitter, LinkedIn, Google + or email with the buttons above.

Commercial Real Estate Myths Series: Myth 20

Posted by Thomas Miller, CCIM

Myth: “Distressed properties are cheaper and easier than working
with a seller who’s under no particular pressure to sell.”

Commercial Real Estate Myths Series – Series 2 (PDF)The reality is that when you’re buying a foreclosure from a bank or dealing with a lender on a short sale, don’t expect logical, rational or remotely timely decisions. Banks work on their own set of rules and have their own priorities. They make decisions based on the financials at the moment and usually don’t consider the future costs of a delayed sale or the condition of the property.

In fact, distressed sales often take much longer than normal to close if they close at all. And they are far more difficult. Lenders are extremely difficult to deal with, whether it be a lack of communication or incompetence, who knows? But it takes many months to get approval. And in the end, the buyer may not get the property and lose out on other good deals along the way with the wasted time dealing with a perceived ‘great deal’.

Another factor is that many times the degree of distress to the building systems the property has experienced during it’s time of vacancy can be substantial and not easily discovered until the property is reoccupied and set into full use again. This is but another unknown that should be considered.

While some foreclosed properties may yield a viable and valuable purchase to the fortunate and savvy investor, the sage advice of ‘Let the Buyer Beware’ certainly holds true for distressed / foreclosed real estate.

Our posts are intended to educate commercial real estate users so they can make better decisions in their real estate use, investments, buying and selling. We encourage your input and commentary. If you are enjoying these posts and finding them useful, help spread the word via Facebook, Twitter, LinkedIn, Google + or email with the buttons above.

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