Reasons To Be Excited About Investing in Commercial Real Estate This Winter
December 12th, 2013 by Diane Moore
The apprehended winter months are making a comeback with the slowing down of real estate sales. This is the time of the year when buyers would opt to remain snuggled indoors instead of venturing out-watch a Christmas movie and eagerly wait for the onset of spring.
In places where there is a lot of snowfall, people don’t have a big desire to go out and scrutinize properties. In addition, moving in the winter months may not be a pleasant experience, especially in regions where it’s drastically cold. These determinants can all add up to make investments in commercial real estate a slim affair.
However, it always does not have to be this way as some real estate investors find this the best time of the year for making new investments.
Here are the main reasons on why you need to consider the commercial real estate investing this winter:
Make it a Point to Buy
When everyone else is sipping hot coffee in their comfortable houses, it’s about time to hunt for the property. With relatively less demand, the chances of acquiring properties at a significant discount are high-so be ready to pounce on the opportunity.
Real estate agents can be the right place to secure discounted property, particularly in slow markets. It’s surprising to note that many of the best deals are unavailable in the open market. A good broker besides knowing his market in detail will also know a lot about discounted properties in his area.
Search for properties on the market which are on sale at a discounted price. Inspect them cautiously and try to find out why they have been put up for sale. Some owners would like to liquidate their assets as a kind of estate planning. In certain cases, owners may be facing a tough time paying for their loans and would like to sell to narrow down their losses. In addition, there is now a decent number of foreclosed commercial properties on the market.
Whatever the price of the property, your negotiating skills both with the agent and seller goes a long way in determining the actual price you pay.
Find the Right Time
If you buy a property in autumn or winter, you’ll have adequate time to rehab it for those purchasers coming out of a long period of inactivation in the spring. Remodeling or fixing up your property in the cold months may not be fun, particularly if you are doing the work on your own. However, you’ll not find a better time than this.
Find cheap methods to repair and fix your property. This will save you loads of money and enhance your cash flow. You can paint the walls with wallpaper using primer and coatings of paint with darker shades. Ceilings with stains of water cannot be painted. In such case, a drop ceiling can be an ideal solution while covering the ceiling and making it look absolutely new. Items on the exterior like an old driveway can look new with a sealant coating for a few dollars.
Trimming the shrubs will give a clean and fresh look to the outside of the property. You’ll not require lots of money to transform an inferior looking property into an extraordinary one.
Here are some great strategies on renovating your property on a restricted budget.
Learn to Bargain
Property owners do not hire contractors at the same rate during winter months than the rest of the year. This ensures that you’ve greater number of contractors to select from, which eventually creates more space for negotiation (they would like to buy their children the best Christmas gifts too). Derive maximum advantage from the labor discounts during the winter. Get multiple quotes and go for a negotiation of the price to get the maximum returns.
The property market is under a transformation, creating a new playing field for property owners who are finally able to sell their assets, and also for buyers who’ve been postponing a purchase, expecting the prices to fall, as reported by Money Magazine.
According to a survey carried out on 982 purchasers in 19 markets by Redfin, 70% of buyers said that they have faced stiff competition on a property for at least a single offer. Around 46% were of the view that this is the best time to buy a property-which is down from the first quarter of 2012 at 56%. On the other hand, 32% said that this is the most favorable time to sell a property-which is a growth of 13% compared to Q1 2012.
In a public statement, Redfin said that many purchasers emerging from a period of hibernation this fall are eager to derive advantage of low rates and rock-bottom prices-which currently seem to have become unnerved by the fierce competition for a restricted selection of properties for sale.
“According to Money Magazine, property buyers may have the maximum bargaining power in the Northeast and Midwest while sellers may be in greater control in the West.”
Property Owners Are Happy to Sell in Winter
According to a survey conducted by Ideas Exchange in Melbourne this year on 25 real estate professionals, vendors should stay away from following the crowd, who wish to wait for the onset of spring to sell their properties. Around 90% of individuals who were a part of the survey said that selling whenever it’s convenient should be the ideal approach. Only 10% suggested the vendors to wait until the arrival of spring to sell their properties.
An overwhelming majority-around 70% believed that the rate of selling properties during the winter months was the same compared to other seasons of the year. Respondents didn’t think that vendors would earn more if they sold their properties during the most active times of the year.
Every month is an equally good time for selling, according to Leanne Howard, managing director with the Real Estate Project-owner of Idea Exchange. She said that this is invaluable information for an agent wanting to contact a vendor in the winter, and also for any vendor contacting an agent.
Alex Schiavo, director of Melbourne-based Kay & Burton South Yarra, says that…
“The number of properties available in winter is relatively less-nonetheless, it’s a great time to buy depending on the dynamics of supply and demand.”
Christmas Is the Best Time to Buy a Property
Almost no one looks at properties on Christmas Day. However, purchasing on this day can be a smart move. If you explore the properties on which you’d want to make offers a few days prior to Christmas, you’ll undoubtedly be better positioned.
The reasons why Christmas Day looks so attractive for purchasing properties are as follows:
- People are in excellent moods and feel more generous.,
- There are few purchasers looking at properties during Christmas week. Hence the chance of stiff competition or multiple offers whatsoever can be relatively low.
- Property prices are on a 12-month low during the month of December.
- If a vendor puts up his property on sale during Christmas, it shows that he’s hell bent on negotiating and selling off his property. Why don’t you go ahead and write an offer?
Foreign Buyers Are Boosting Commercial Real Estate Investment
The commercial real estate market is rapidly gaining lost ground following the recession. A surge in investment coming from international investors is accelerating pretty dramatically, according to Mark Gibson, executive managing director with HFF LP. These buyers are spreading out from the markets in the East and West Coast to make their purchases in other cities like Dallas and Houston.
The investors are aiming at the markets with population and job growth. They are also trying to find the infrastructure which will bolster population and jobs growth. Gibson says that HFF-the largest commercial real estate property marketing and investing banking company in the US-is forecasting approximately $ 350 billion worth of investment in the commercial real estate sector by the end of this year.
Even with the higher interest rates this year, investors are putting in billions to secure commercial properties. According to Gibson, there is a lot to be seen in the commercial property market this winter despite the growing cold as investors are hungry for the best properties in the country.
Excellent Atmosphere for Commercial Real Estate Investment
Even though there seems to be a credit crunch for securing commercial loans and greater underwriting surveillance for mortgage applications, it’s a definitely a good time for making investments. Many financial professionals are of the notion that the commercial real estate market will not fall like the residential sector has. However, there will be a price adjustment of about 10-20%. In certain sectors like retail, the fall could be significant.
For properties, which are under $ 5 million, community and local banks, who generally stay away from securing mortgage loans, are lending to buyers who are qualified. This lending is being carried out with a closer examination on stringent underwriting fundamentals, personal guarantees from borrowers and cautious pro formas for estimates of cash flow in the future.
The fundamental aspect of buying commercial property in the winter lies in comprehending underwriting standards and basic valuation. Experts are predicting a drop of 25% in the values of commercial properties in the early part of next year. There may be some great opportunities for buyers who are well-capitalized to make an entry into the market during the cold months.
Fewer Competition from Buyers
The most obvious advantage of buying a property during the winter is because of the fact that real estate knowledge says to shop during spring and summer. Due to this famed piece of advice from realtors, there’ll be relatively fewer buyers to compete with you during this time. It’s easy economics- the slim demand works in your favor.
Hence, for an investor looking to hook up a great deal in the property market, the cold months can be considered as the prime time.
To Sum Up
If you’ve remained on the sidelines, silently waiting to buy a property, now might be the best opportunity you’ve been waiting for. With decreased competition, your property might be just a single lead away, and your maiden profitable transaction around the corner. If you have carried out the preliminary work, cultured yourself on the area of investing in commercial real estate, just gear up and take the maximum possible advantage of the winter months.
Just because of the approaching holidays and the following long winter, do not think that this is the time of decreased productivity. Rather, focus on the advantages the season has to offer and utilize them to improve your investing business.
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