Due to present economic condition there is a significant increase in the number of foreclosures across US, the increase has been 20-40% more than previous year. This includes the commercial foreclosures. Number of commercial foreclosure properties is less as compared to residential foreclosures but is on the rise due to economical recession.
The Commercial foreclosures include industrial buildings, retail buildings and centers, office buildings, apartment complexes, strip malls, shopping malls etc. These are a result of large numbers of Bankruptcy cases which involve corporations, LLCs, partnerships, limited partnerships and their main asset is a commercial property.
There are several reasons due to which commercial properties face foreclosure, mainly due to delinquency of their mortgage payment which may be due to increase in property tax, increase in interest rate from lender, unexpected repairs or a balloon payment etc. Once the commercial property owner fails to make a payment and there is no solution the lender can provide, the debtor files chapter 11 Bankruptcy to stop the foreclosure.
Chapter 11 bankruptcy filing allows a debtor following things:
- Sell Assets
- Repay creditors
- Extend repayment of taxes
- Liquidate the property
- Obtain new financing or refinancing
- Stop lawsuits or initiate lawsuits
Chapter 11 bankruptcies have some excellent options for a commercial property owner who is facing foreclosure which may have irreparable financial damage to him. This is just to avoid foreclosures once you have purchased a commercial property.
Commercial real estate is a $4 trillion market with a 20% year on year increase. Smaller investors can get good return of their investment on commercial properties which depend upon length and term of lease, the tenant’s reliability and the overheads involved with the property. Finding the perfect tenant is not easy because there are potentially less commercial tenants than the residential ones.
Due to recession commercial foreclosures increase as the entrepreneurs are hesitant to start new ventures and if the commercial property remains vacant for too long the owner has to sell property at a very low price or face a foreclosure.
Profits can be made by people in real estate if they take calculated risks and have expertise in commercial properties, others who do not have knowledge have several listings available on internet on commercial foreclosures. Also there are various articles, videos and news on commercial foreclosures available which can tell you about latest developments in commercial property and give leads on latest commercial foreclosure available. They have experts on this subject who can guide you starting from making a decision to final handover of property.
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Written by Alex Rolim.
