Why Commercial Short Sale And Not Residential?

So you know the basics about short sales and why banks are willing to make them. The next question you might have is, why move into commercial short sales? The residential market, by virtue of being even worse off that the commercial real estate market, might seem that it is a chance for more opportunities for profit.

Money Making Opportunities in Commercial Foreclosures

The answer is simple but slightly counterintuitive. Not every money making opportunity is created equal. Commercial properties are better than residential properties in large part because the market is less distressed. The conditions surrounding residential properties in danger of foreclosure are different from the ones in the commercial market. One of the most remarkable things is that despite being “underwater” many commercial properties are not necessarily bad or poisonous assets.

How it Happens: a Healthy Foreclosure

So how do otherwise healthy commercial properties end up in danger of foreclosure? It’s largely because of the economic climate and the effect it has on the availability of credit. You see, while the economy was going strong, many property investors swept up properties under short-term loans, or loans that let you borrow a certain proportion of a property’s value in order to buy the property. Then the buyer would rent out the property, and would make a profit after paying off the interest. The plan was to eventually take out another loan when the first one came due, or simply sell off the property to pay off the debt. But no one predicted the crash of the real estate market, and as a result, neither plan was a viable option as property values sunk to less than the debt owed on them. Therefore even otherwise productive properties are ripe for flipping, and it is these properties you want to have your eye on as an investor.

Even More Advantages of Commercial Real Estate

There are other reasons to favor the commercial real estate market too. Firstly, because the worst of the crash was in the residential sector, commercial prices are likely to recover first. Commercial property values are linked to the overall economic performance of the region, as demand is driven by the number of new businesses that are clamoring for property.

To Make Money in Real Estate

If you want huge profits while putting out a relatively low level of effort, you must know where to look. Commercial short sales are the perfect opportunity for you if you follow this advice.

Copyright (c) 2010 Jack Bosch

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