Many people had been predicting seeing a ton of great investment opportunities coming onto the market, and it simply hasn’t happened. As an example, the impact from COVID-19 has totally hammered the retail and hospitality industries, and yet we haven’t even seen a plethora of opportunities coming onto the market at greatly reduced prices from within those two sectors.
So in taking a look at this, I believe it’s very important to recognize what happened during the last economic downturn, called “The Great Recession”, in terms of how distressed properties suddenly began being handled by the lenders. Because up until that last downturn, when commercial property loans remained in default, and the borrowers continued on in not making their payments on those loans, the lenders would then foreclose, and investors could then swoop in and make solid investment purchases when this would be happening.
But during The Great Recession, lenders instead began doing workouts with these borrowers, allowing them to defer their interest and monthly payments, which allowed the borrowers to then keep their property, and it allowed the lenders to keep the loans on their books at their full stated amounts, and not foreclose, saving the lenders massive write downs on these loan amounts within their own financial statements.
So the borrower then was happy, the lender was happy, and it was “bye-bye” to a huge amount of great investment opportunities that would have traditionally come onto the market.
Now let’s fast-forward to today, and while no one can predict with certainty where our economy will be headed within the next year, even if it worsens, and property owners can’t make their loan payments, it is very likely that the lending industry will be doing these similar kinds of workouts again today.
Therefore, in keeping this in mind, this will likely once again minimize the number of great investment opportunities that will be coming onto the market once again, but we still could see some owners selling at very attractive prices, because they may need the money.
So in putting all of this together, if you’re someone who will be looking to buy when a good opportunity arises, understand how to recognize a good investment opportunity when you see it, and then be prepared to move in, and act immediately!
