Pony up to take advantage of commercial real estate opps

Posted: September 11, 2010 in Uncategorized

There are incredible commercial real estate/ business in Denver and the surrounding area! Many business owners financed their businesses with a 5 yr balloon note and cannot get these loans refinance!! Even though the SBA and gov is offering Commercial modification loans to try and help, it is more of a gesture than a program your local banks are assisting with. This is causing alot of problems for business owners that are experiencing steady but lower sales due to the economy. Banks are unable to help there long time clients because of there fears of being overextended if the property values continue to plummet! SO the banks don’t lend, the business owners have their loans called due and have to panic sell their business for a low price. This justifies the banks decision to not help in the first place and re enforces the banks stand that commercial property values are going down. Next loans go delinquent, businesses are panic selling to keep some equity. Yes this is a buyer’s market, but BEWARE!!

Of course there are great deal and but there are some sand traps! Here are some tips from Kenny D when you are looking to broad base your commercial real estate portfolio in this marketplace.

1) make sure you have good representation and a very good commercial real estate agent (like Kenny D!) Lawyer can take care of the legal loose ends, but buying a property in this environment could cost you more than you bargain for! New business owners normally are required to bring up to code all of the items the previous owner did not have to!!

2) Bank financing is almost non existent or will require 30 to 45% down base on what THEY value the land at! SBA loans require as little as 10% down AND will include renovation costs, but are paper work intensive! Owner carry options are becoming more and more common, BUT BEWARE!! Cutting corners on your due dilligence could cost you thousands! Owner carry financing does not have the many safe guards that an SBA or bank financing loan will require to fund the loan. Title work, MAI Appraisal or very very good BPO ( I am certified to do these!!) are a must to make sure that you are not paying too much!

3) Use common sense, and be investigative! Many times the answers on why a business went under is visible by looking over the facility and/or titlework, public docs etc. A trained commercial agent can be of great value in lending his experience and knowledge of an area, and interpreting the public records on a property.

4) The less you pay for a property , the more money you will likely need to put into the property to get it up and running and up to code! Thinking that you will do better because you are smarter or will work harder and overlooking the facts because the price is so good will get you broke!! Hard work and smarts will enhance a business, enhancing a problem will only cost you more than if you were not as smart or lazy!!

This is the time to position yourself and your business for the inevitible rebound of the economy. If your business is maintaining itself, you are in the top 15% of business in Denver! Buying and acquiring property in this economy will help you position yourself for large gains in the future,, but make sure you buying with a beer budget and with sensible long term financing!!

Kenny D

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