Brad Ahrens - Surviving the coming commercial real estate CRASH
The 3 golden rules to success during a commercial real estate market correction.
There are three simple rules to success when investing in real estate today, Wait, Pass, and Sprint.
There is a vast portfolio of heavily discounted distressed commercial real estate deals under the surface, hidden from view and moving towards making their debut on the market on heavily discounted terms either through foreclosure, note sale, rescue capital, or litigation.
Inexperienced sponsors who have built large portfolios quickly in the last few years are panicking, figuring out how to save their assets, wondering what to say to their investors, and thankful they charged excessive fees earlier on because they’re going to need them to cover legal fees if they don’t handle investor relations effectively, right now.
Seasoned professionals, however, are sitting pretty.
They have cash and they are waiting, patiently, for the inevitable surge of off-market distressed assets.
That’s Part One to success in a distressed real estate market: The Wait.
Deals are coming to market but truly professional sponsors are watching as other, less experienced buyers have been and continue to make unrealistic assumptions to justify their purchases: Overly ambitious rent growth projections, aggressive exit cap rates to juice returns, unrealistically short projected deal timelines (to pump up IRR projections).
That’s Part Two: Pass on deals that are being overbid on and acquired by amateurs.
And that brings us to Part Three: The Sprint.
When there is a deal that makes sense and you have the chance to buy a heavily discounted distressed deal, you’re going to need to move with blistering speed on due diligence, underwriting, and capitalization to give a seller, desperate to be relieved of their misery, certainty of close and to win the deal from other aggressive, professional buyers.
Listen in as Brad and I discuss these three aspects of successful distressed deal investing.
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