Distressed commercial real estate is one way for investors to remain active in the property market, even in the midst of a major global crisis such as COVID-19.
Economic downturns usually lead to less access to brokers and active listings, however, requiring a more proactive, off-market approach. Is there an easy way to do that? The short answer: Yes.
Reonomy’s property intelligence platform enables users to quickly scan a market, spot commercial assets (of any kind) in distress, analyze those assets, and get in touch with the owner and/or lender of the property.
Below we’ll look at the types of property distress, the full scope of what it takes to find distressed properties on Reonomy, and how you can carry out an off-market purchase.
What is property distress?
In a commercial or residential setting, property distress occurs when an owner can no longer support the mortgage payments or physical structure of an asset.
Most often, the end result is foreclosure, where lenders repossess and sell the property.
The cause of distress may be specific to one individual. In very unfortunate situations like coronavirus, distress can run rampant across entire economies. Terribly enough, that’s where we find ourselves today.
Interpreting Signs of Distress
Different types of distress, in any market standing, can be identified by specific cues:
Different types of distress can be identified by specific cues, especially for those doing off-market analysis.
1. Transactional Cues
A potential financial tipoff to distress? Looking at an asset’s most recent sale price.
Experienced investors know whether or not an owner paid too much for their property, or if some function of a transaction appears “off.”
- Reonomy tip: You can discern the value of an asset with the help of property intelligence, thanks to in-depth property sales data and comparables in any market.
By digging into a property’s most recent sale price, and understanding its likely income and value, you can quickly see if it’s in the best interest of the owner to sell (even if they’re not actively in distress).
2. Debt-Related Cues
Now, considering that distress often means pre or full-foreclosure, debt cues serve as the clearest signs of financial distress.
Specifically, red flags can be found when looking at a property’s most recent mortgage amount, and the maturity date of that loan.
Similar to a sales price, backing into a monthly mortgage payment can tell you whether or not that owner has a positive NOI month-over-month.
- Reonomy tip: With property intelligence, on top of in-depth mortgage and lender data, you can actually see if an asset is currently in pre-foreclosure, as well as the stage of pre-foreclosure, and auction date.
3. Physical Cues
This one is pretty straightforward. By visiting a property in person or via the internet, physical dilapidation is a very clear sign of distress.
While these assets will require some TLC and elbow grease, the owner may be willing and looking to sell well-below market value.
Now, on to the nitty-gritty—showing how you can use Reonomy to quickly pursue these opportunities off-market.
Finding Distressed Commercial Properties with Reonomy
No matter what geography or commercial asset type you’re after, Reonomy’s property intelligence platform can return the insights you need, usually with just a few clicks.
One straightforward way to start (before you’re more refined on the platform), is to simply search for commercial assets currently in pre-foreclosure.
This can help you get a better feel for opportunities in your desired market before you start doing more thorough, proactive research.
Within the platform, you can search through the full supply of commercial properties with two applicable filters: Auction date and Pre-foreclosure category.
Auction Date choices include:
- “Next 2 weeks”
- “Next month”
- “Next 3 months”
- Create a custom date range
Pre-foreclosure category includes the following options:
- “Final Judgement of Foreclosure”
- “Lis Pendens”
- “Notice of Defaults”
These filters are a quick tip-off to distressed properties likely to be sold in your area.
For lower-lying cues, you can study the sales and debt attached to any one asset.
Layers of additional filters around asset type, size, value, location, and tenant structure can be added for you to find opportunities within your intended scope.
Finding Distressed Commercial Properties
Reonomy makes it easy to filter your search based on commercial asset type.
To do so, select the Asset Type tab in the Reonomy platform. Here, you’ll find certain assets like offices, mixed-use spaces, retail spaces, warehouses and more.
Finding Distressed Land
Similarly, finding distressed land is just as simple.
For example, say you’re looking for agricultural land that’s currently in Lis Pendens.
By applying these filters, you’ll see hundreds of results that meet your criteria. Then, you can explore each result on an individual level to find the perfect investment opportunity.
Finding Distressed Multifamily Properties
To find distressed multifamily properties, such as duplexes, townhomes, or apartment buildings, the process is the same, except in the Asset Type tab, you’d instead choose Multifamily.
You can search for all multifamily properties in the platform, or narrow down your search to specific submarkets, like cooperative, triplex, or nursing home.
After you’ve selected your search filters, you’ll get a list of properties that meet your requested parameters.
Other Ways to Find Distressed Properties
Although Reonomy is a quick and seamless option, it’s not the only option for identifying distressed commercial properties.
You can also use traditional listings platforms to discover possible investment opportunities, or call banks directly to find out what properties they might be selling themselves.
Below, see some well-known bank-owned listings websites.
REO and Banked-Owned Listings Platforms
Depending on what type of asset you’re looking for, there’s a variety of listings platforms that allow you to search for real estate owned (REO) or bank-owned commercial assets.
These properties have already been repossessed by lenders or banks and are typically a priority to re-sell as quickly as possible.
Below is a list of potential REO and banked-owned listings platforms to help you find repossessed commercial assets:
One of the largest commercial real estate listings platforms, LoopNet provides an easy way to find distressed properties, specifically REO and bank-owned assets.
LoopNet allows you to search specifically for bank-owned property in different states and locations across the United States and Canada.
Bank Foreclosures Sale
Bank Foreclosures Sale is another listings platform specializing in both residential and commercial distressed properties.
Similar to LoopNet, you can search explicitly for banked-owned assets. Properties are often 30%-60% below market value.
Preforeclosure.com is a listings site featuring mostly residential properties but in the pre-foreclosure stage. However, investors can find a handful of multifamily listings as well.
Search by city, state, zip code, or listing ID, and explore auction and foreclosure information.
Individual Banking Sites
For example, Southeast Bank Properties has an entire listings page dedicated to commercial properties for sale.
Searching on these websites makes it easy to find distressed properties and deal directly with the banks or lenders who own them.
Discovering distressed properties doesn’t have to be difficult. And while the world currently faces very uncertain times, it’s not a signal for investors to bow out of the market.