Market Status of Commercial Real Estate

Mike: Welcome back to the flipnerd.com REI Classroom where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Kathy: Hi, welcome to REI Classroom. I’m Kathy Fettke, co-CEO of Real Wealth Network and host of The Real Wealth Show on iTunes, and I want to talk to you a little bit about commercial real estate.
Mike: This REI Classroom real estate lesson is sponsored by the investormachine.com, FlipNerd’s private investor coaching program and your blueprint to investing success.
Kathy: Because I follow market cycles, and I’m really concerned about the cycle that we’re in right now, because so many people, experienced investors and new investors, are jumping in and settling for really low cap rates thinking that they’ll never be anything good so they’re just going to settle on kind of good. I’ve got to tell you that never is the case. Every 10 years we have a market cycle. Prices go up and prices go down.
Here’s why I believe prices will begin to soften in commercial real estate and you don’t have to settle for low cap rates. Coming this August, $90 billion worth of commercial loans are coming due. They’re not resetting. They’re coming due. It’s estimated that about half of those, about $45 billion of commercial loans, won’t have new financing available because either the values have gone down or the incomes have gone down on those properties, so banks would only refi if the owner put in more money.
Not all owners are going to have that kind of money to put into those projects, because many of these loans were taken back in 2006 when anyone could walk in the bank and get a loan. They didn’t really have to have much commercial real estate experience. They could also get commercial loans sometimes as high as 95% LTV. Well, that’s not available today, so many of these loans, $45 billion worth, are going to be put into the distressed asset category.
You could settle for a low cap rate today, or you could wait three or four months, or even now start to find the people who are in this predicament. If you can help them with some end financing then you can get a piece of the deal most likely. It would be a really good time to learn how to negotiate with banks because the banks aren’t going to be able to take back all these assets so they might renegotiate the loans. It’s a really good time to be a great bank loan negotiator and also a great time to have access to money.

If you’re not a syndicator already, learn how to raise money because you can go in and acquire these properties coming up in the next few months, again starting in August, even starting now if you can find the people who are going to need your help. If you are one of those people, don’t wait until August. Find out what your different exit strategies could be, because there may not be end financing for you and you don’t want to lose this property to foreclosure just because you can’t make the balloon payment.
Again, don’t settle for low cap rates. Know that there’s really good deals coming. Everything cycles. We’ve been at a real peak. Don’t pay peak pricing. Wait, because prices are about to soften in commercial real estate.
All right, I’m Kathy Fettke and this is REI Classroom. Thanks for joining me.
Mike: Are you looking to change your life through real estate investing? If you’re interested in either getting started or taking your business to the next level, please check out FlipNerd’s private program at theinvestormachine.com. This is the most robust real estate investor coaching, networking, and mastermind on the planet and designed for your success.
If you’re ready to roll up your sleeves, ready to take personal responsibility for your own success, and ready to dive into a world-class instructional coaching program that provides you step-by-step instruction to help you achieve financial freedom, then you should apply today. Spaces are limited and candidates are only considered after an application and interview process. Our 12-month investor program is unparalleled. Think you might be a fit? Learn more today at theinvestormachine.com.
Please note, the views and opinions expressed by the individuals in this program do not necessarily reflect those of flipnerd.com or any of its partners, advertisers, or affiliates. Please consult professionals before making any investment or tax decisions as real estate investing can be risky.
Are you a member yet of flipnerd.com, the hottest real estate investing social community online? If not, you can join for free in less than 30 seconds and get access to hundreds of off-market deals, vendors in your market to help you in your business, and you can start networking with thousands of other investors just like you. Get your free account now at flipnerd.com.
Please check out the FlipNerd family of real estate investing shows where you can access hundreds of expert interviews, quick tips, and lessons from leaders across the real estate investing industry. They’re available at flipnerd.com/shows or simply search for FlipNerd in the iTunes store.