This Article Discusses Attracting Buyers To Your Commercial Property.

As a commercial real estate investor, there always comes a time when it's the right point in the market cycle to sell. Either because you've turned the property and are looking to flip it, or, for a smaller commercial real estate venture, because aspects of your life have changed (usually retirement) and you want to cash out and enjoy the equity you've accumulated.

With the current shake up of the commercial credit markets, particularly in home mortgages, the conventional wisdom is that this is a horrible time to sell a property. We've had a subprime mortgage rate meltdown, we're seeing foreclosures at historic highs, and anyone looking to sell a property is finding the asking price to be under what they paid for it.


So evidently, this is just a bad time for investors to sell across the board, right?

No, not exactly. Commercial real estate has been hit by tightening credit lines - make no doubt about it. However, market segmentation, and the fact that most businesses do better ground work before riding into debts on properties means that there hasn't been a corresponding devaluation of the commercial real estate segment. What there has been is a move to shift securities over to property rather than stocks, bonds and other fungibles as the market goes through its corrections.

This translates into a moderate sellers market in commercial real estate, as people try to get their funds into something more stable. While commercial real estate isn't as sexy as something that promises sky high rates of return, for investors looking to retain their housing market bubble gains, it provides the equivalent of the cash-out option mentioned above.

Current estimates show that somewhere between 200 billion and 250 billion dollars will be funneled into commercial property in the US over the 2008-2009 fiscal cycle. With a rate of return that varies from 6 to 9 percent (and is doing better than most bonds), and a (compared to home owners) low rate of foreclosure, this is a good time for selling property to the right group of investors.

Where do you find the group of investors? The first place to look are the usual suspects - insurance companies and pension funds. They're always looking to trade rate of return for stability, and the current market scare has them at the forefront trying to lock up real estate deals. Beyond pension and insurance companies, the next place to look are foreign investors; last year, the total amount of foreign capital put into real estate was over 12 billion dollars, more than 9 billion of that in commercial real estate.

It used to be a truism that you'd never find a foreign buyer for properties outside the big three major metro areas (Southern California, the Boston-Washington Corridor and Greater Chicago). However, as those venues have built up and been bought out, the price for entry is getting higher - and many foreign investors, looking to park their dollars into something of tangible value before they devalue further, are looking further afield for the properties they want to invest in. This can work to your benefit if you have developed properties in tier two (Atlanta, Houston) and tier three (Indianapolis, Tucson) cities for commercial real estate.

As always, selling commercial real estate in a city with active job growth is easier than selling in areas with economies in the doldrums; one useful pitch point when recruiting investors or buyers is to look at small cities with industrial redevelopment grants. These are cities actively trying to lure new business to them, and as such, are good growth markets for commercial real estate investment.

Other aspects that can help you lure a buyer for commercial real estate are location and facilities; in much the same way that home improvement plans can boost the sales price of a house, putting in additional infrastructure (such as FiOS networking cable, or a freight elevator, or just re-planning the floor of a warehouse) can improve the marketability of a commercial property for prospective investors.

Commercial real estate that already has a regular pattern of tenancy, and a good cash flow based on rental income is a major selling point when attracting a commercial real estate investor - don't overlook the sales potential of the tenants and businesses you already host and provide services for. Indeed, they may be one of the prime candidates for selling partial shares of the building. A lot of businesses look to lease a building, then the owners buy it, and then lease it back to themselves through a corporate shell. It allows them to move most of the costs of maintaining the building onto the tenant, which turns it into a tax deduction for their business.

Another source of investors for a commercial real estate property is, believe it or not, local churches and charitable organizations. Many of them are looking for safe investments with a positive cash flow; they invest their capital (a small amount) in the property, and use the income from that investment to cover most of their operating expenses, and eventually to drive their charitable donations. Because churches are tax exempt, this is a particularly interesting way for them to generate revenue, without putting their core assets at risk.

Lastly, there's always the prospect of finding a commercial real estate speculator who's looking to buy, upgrade and flip a property. While this is no longer precisely viable for rental properties, it can be done in some markets for commercial real estate.

Regardless of whom you bring on board as a buyer or investor in your property, do the proper due diligence - check references, credit rating and liquid assets. Don't get so desperate to sell that you forget to do these basic steps.

By: Tony Seruga, Yolanda Seruga and Yolanda Bishop

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Tony Seruga, Yolanda Seruga and Yolanda Bishop of www.maverickrei.com specialize in commercial and investment real estate. As of May, 2006, they and their partners are managing over $600 million dollars worth of new projects.

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