Is commercial tax delinquent property a good beginner investment? Post 160

Coach Mitch’s REFLECTIONS™

 

Another subscriber question.

Hi Mitch,

Have you ever done this … (tax delinquent property investing…ed.note)

with Commercial Real Estate ?

Thanks, Angelo

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Angelo,

Thank you for the question.

Investing in commercial tax delinquent property is done in the same manner as residential property investing.

Typically though,

• the sellers are more sophisticated,
• have many more assets,
• as well as a greater debt load,
• and are under pressure
• from sources that are more aggressive than a residential bank.

You will find that commercial property is often encumbered with private financing and therefore owners are familiar with it, and that these owners are open to creative solutions because that is often how their purchase was put together.

The larger properties are not usually free and clear. The tax bills are not paid because the tax bills and other expenses are high and the owners did not manage rents well. However, sometimes the small 2-4 multi-family and small mixed-use properties are free and clear. A downstairs grocery store with an upstairs apartment is a good bet. Be careful of bars and other businesses which are trouble or subject to the vagaries of the economic climate, like nail and suntan shops.

The big difference between residential and commercial is the range and the depth of knowledge you must have to safely invest.

• Financing differences,
• zoning restrictions,
• code enforcement will be much stricter,
• leases are much different,
• Grandfather clauses,
• taxation complications,
• and licensing issues all need to be thoroughly understood.

 

The differences between residential and commercial mount

• The different types of repairs (awnings, big showcase windows, basement doors on the street) and the difference in costs between commercial repairs as compared to residential repairs will stagger you.

• All sorts of high priced professionals are necessary beyond the legal, accounting and construction professionals, e.g. I had to hire an Aquatics Engineer to defend myself against a suit by the town for something that my commercial tenant did.

• The government and judges do not look upon commercial owners with any pity; and these are just the beginning of the concerns. For anything above a small mixed-use building, you should figure a significant budget for legal and accounting advice.

If you are still haunted by commercial property…

• If your interest in commercial property is unwavering, first, thoroughly read several commercial property forums to become familiar with the jargon and the many and varied issues.  I’m really serious about this caution.

• Then, if still hungering for commercial, talk to your lawyer, your CPA, and your commercial Realtor.

• Consider commercial real estate appraisal courses. Find a CCIM and speak about creative commercial concepts.  A CCIM (Certified Commercial Investment Member) is a recognized expert in the commercial and investment real estate industry.

This is an area that just begs you to be prepared.

Commercial investing is shark infested waters. It is full of snakes accomplished at speaking with forked tongues.

Start with residential unless you are a snake charmer with anti-venom in one pocket and a fat bank book in another pocket.

See Coach Mitch’s “Ridiculously Simple System…” ™ for details.

Call me, we should talk.