Conventional wisdom has this to say about property investing; the best time to invest in property is when the market is going up. It is true that it is easier to make money when the market is going up. That is sort of a “no brainer”.
However, if history is any guide, the people who made the most money with real estate in the past were the ones who invested when the market was down.
Let us consider 7 reasons why it is a good time to invest in commercial property.
1. Less Competition: There are less people in the market so you almost stand out as someone who could be a real buyer. Realtors are ready and willing to take time with you. You are not just one investor in a crowd of many investors. Realtors need to make that commission and with few buyers they have a lot less commissions and less money in their pocket.
2. More Choices: When the market is down the people who were trying to invest on a shoestring and with little or no training or experience have gone out of business. This leaves many very prime investment properties available. Also, there are fewer investors in the market willing to buy. Just think of all the different types of people who are involved in a commercial real estate transaction; attorneys, surveyors, banks and loan officers, mortgage brokers, private money lenders, title companies, property inspectors and more. All of these people need more work and are willing to take the time to help you get the best service.
3. Prices are Down: When the market goes down most people run like scared rabbits. The people who run are usually those who had little experience, knowledge or guts to do what it take to make their business successful. When this happens the prices fall like a rock. When you are a prepared investor you can take advantage of these conditions. This does not mean that you can just buy anything because the price is down. You have to analyze other market conditions as well as analyze everything about the investment. Price is not the only consideration when you make an investment.
4. Improvement cost has decreased: Even though it does not make sense, costs to improve the property has gone down with the downturn in the economy. Vendors who have materials and who provide services also need work. They are willing to reduce prices of material and services to get more business. In those times the prices are not only lower but you may be able to negotiate even better prices.
5. Labor for improvements are less: Many types of construction workers, carpenters, plumbers, roofers, landscapers, site improvement companies, and others all need more work. You usually do not expect the price of labor to come down but when people need work they will take less per hour or per job. In some places labor cost has gone down by as much as 30%.
6. Sellers more willing to take creative financing: In an up economy sellers can demand and get not only their selling price but get all cash. When the economy turns upside down so do the sellers. They are much more willing to consider other creative financing. This can take consistent and even long negotiations. I have seen sellers even take as much as 98% seller carries back financing after much negotiation. When the seller is behind on his payments to the bank, that bank may seriously consider a short sale or other options. There are many options that you as a buyer have when buying in a down economy that are not available to you in an up market.
7. State and County Governments are easier to work with: State and County government budgets are shrinking by the day. They are looking for any legal way possible to increase their revenues. When the market is up the competition is so fierce that they only take what they consider is the best of everything. In a down economy they are willing to sit down and work out some solution that will work for both of you. In my area several companies have worked for over 10 years to get the local government agencies to let them build an adult living center but with no luck. Things changed when the economy went down and recently a company was given the OK to proceed with the project.
If you are not an expert in such things there are ways to get to be an expert. You can team up with an expert, get training from experts, and get advice from others who are part of the process. They include realtors, bankers, joint venture capitalists, appraisers, and even government offices in your area.
Property investing in a down market takes real guts. But guts need to be backed up with through knowledge, analysis, preparation and an exit plan. Do not underestimate the value of these things in a down market. The profits are there for the taking.
|The next step is to check out the 7 steps to becoming a successful commercial real estate investor at http://www.PropertyInvestingInformation.com
Author: S.Reid PhD
Article Source: http://EzineArticles.com/?expert=Sara_Reid