Speeding Commercial Real Estate Sales in Slow Markets Effectively building commercial real estate wealth requires the ability to spot a great bargain …
Speeding Commercial Real Estate Sales in Slow Markets
Effectively building commercial real estate wealth requires the ability to spot a great bargain and the ability to sell that property well, no matter what the state of the market. The real estate market is notoriously cyclical in nature and somewhat difficult to predict. The market for local and national real estate can turn quickly and it is important for every investor in real estate, from the largest player to the smallest, to have strategies in place for selling properties in down markets.
In a hot real estate market, of course, little marketing is required. We have all heard the stories of bidding wars breaking out in the residential market at open houses in California and elsewhere. In the commercial world, its not unusual to have 30, 40, or more institutional and private investors bidding on a piece of prime commercial real estate in a strong urban market. In these kinds of markets, all a Seller needed to do was hang up a metaphorical For Sale sign and wait for the hordes of buyers to appear.
Of course, these markets do not last forever. Lately, were seeing some pressure on cap rates as short term interest rates have climbed in response to the Feds tightening. Those formerly hot markets have become luke-warm markets and are cooling further. As prices for residential and commercial real estate spiraled ever higher, more and more buyers found themselves priced out of the market. Even the creative financing schemes created by mortgage lenders often failed to close the gap. In hindsight, the downturn seemed inevitable, but many failed to see it or prepare for the inevitable slowdown to follow.
Fortunately it is not too late for sellers of residential and commercial real estate to get the most out of their property, even in a slowing market. Listed below are some strategies for turning that For Sale sign into a Sold sign.
Price the property properly. The market will tell you what you property is worth, regardless of what you think. Price the property realistically, especially in a down market. It is important to understand that the value of a particular piece of real estate is derived not only from the underlying value of the property itself, but by market conditions.
Offer incentives to attract buyers. Offering unique incentives can go a long way to boost the attractiveness of a particular piece of property and help you stand out from the crowd. Some sellers are including perks like free plasma TVs, vacations, sporting event tickets, and other unique incentives. Whats important to note about these offerings is that while they represent a very small percentage of the value of the property being sold, they create traffic, interest, and distinguish you from the competition.
Dont overlook the value of curb appeal. How your property looks from the outside is an essential part of marketing, called packaging. Enhancing your propertys curb appeal can often be achieved with little expense. Consider painting, re-landscaping, signage, and minor parking lot repairs. Between two similarly priced properties, the better looking one will probably get sold faster.
There is no doubt that selling a property in a down market can be a challenge, but the good news is that these strategies can help to preserve those hard earned profits.
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