Bank Owned Commercial Properties - Number Crunching Obstacles

One of the obstacles of banked owned commercial properties is that some of them are vacant and they do not have financials for these properties, so you are a bit more in the dark on whether this proeprty will produce an income, sustain an income, what that income will be, and how you will make your first mortgage payment.

One major part of the due diligence process is to crunch the numbers. Evaluating the income versus the expenses and seeing if you have anything left over. If you do not have this informaiton you have to do more research and base you evaluation of what ifs and possibilities, instead of true numbers.

It is easier to get this information when the property is entering foreclosure rather than when it has been foreclosed on. There are more and more lenders who are trying to keep the property rented and managed, so they can sell it easier. They know that it is difficult for a new buyer to get a commercial loan on a vacant property without tenants, expense or rental history. For this purpose, more and more Bank Owned Property lenders are offering seller financing to buyers who buy their REO's.

Here are some pointers on how to get some numbers for an Commercial REO property. Call around to similar properties in the area and identify what they have and what they are renting it for. Ask them if they have any vacancies. Get a commercial real estate agent to get you some statistics for the area such as vacancy rate, average rent amount, tax information, etc.

If you find a property manager/property management company in the area see if they can give you some ball park expense estimates for repairs, maintenance, utilities, insurance, etc. Pick theri brains on vacancy rates and rental amounts. See if they know anything about this property or its reputation.

I normally give myself quite a bit of cushion on these numbers and make an offer based on my estimates. It is normally a very low offer due to the vacancy and so many unknowns.