The word on the street is Commercial, Commercial, Commercial.  There is so much opportunity right now and this old pony has a new trick.  Commercial is seeing something that has not happened in the valley for many years……..distress.  Last year was one of the hardest for commercial real estate and there are many bank owned commercial properties out there for inventors.  There are also many short sale opportunities as well.  Keep your eye on commercial this year.

I interviewed one of Chicago Title’s commercial escrow managers Kristin Guadagno and she is very excited about the recent activity in this segment. She is seeing many bank owned commercial condo units and commercial buildings come across her desk as well as many short sales. “This is a prime opportunity for the residential investor who is ready to move up to the next level of investing.  Now is the time”, boasts Kristin.   Unlike the residential market that has dwindling inventory, there are plenty commercial properties for sale. Kristin warns that commercial is not for your average fix and flipper.

Investing in commercial property is not just about buying low and selling high.  It’s all about ROI (return on investment) – how much is my return on the money that I am actually out of my pocket.  If the property is leased, that figures into cash flow and ROI. An investor would not typically go in and “fix up” a commercial condo unit because they are typically maintained already by an association.  You have higher holding costs and some commercial condos have higher common area maintenance fees that come along with.  Just be sure to do your homework.  Stick to a P&L just like you would on a residential property.  Figure out if you want to buy and hold or buy and flip.  A great buy and flip suggestion are storage facilities.

Short sales are another advantage in the commercial transaction because they are much easier to get approvals.  There is no fighting over deficiencies like the residential side.  It has been my experience the short sale letters do not have the deed restrictions that come with most residential short sales.  The bank owned properties are also nicer to deal with because the banks will allow you to pick your title company and you typically are not dealing with an asset manager that is handling hundreds of files.  They do not care who is buying or where they buy from, as long as they buy!

If you are new to commercial please be sure to use a commercial escrow officer and not your standard residential escrow officer. I find commercial to be a bit easier than residential and it is much more of a business transaction (no emotions, just business). There are things you need to be aware of and you need to be sure you have the right team member in your commercial escrow officer. As they say, have an expert in your corner!  AZREIA now has a sub group that caters to the commercial investors so anyone who may be active in commercial or gathering information to become active should check that group out.

We tell our investors not to pigeonhole yourself to one sector of the market so do not rule out commercial because this is the time to think outside the box. There is lots of money to be made out there!!