Buying Short Sale Condo Properties for Sale


Moving to a huge and busy city costs a lot of money but you can reduce your expenses if you consider affordable foreclosed condo properties for sale. As far as foreclosed properties are concerned some of the better deals have been made through a short sale 新宿 タワーマンション.

Elements of a Short Sale

Condo properties for sale through short sales take place when the homeowner has lost the ability to meet his mortgage obligation. He approaches his lender and seeks permission to sell the property at a price that is lower than his outstanding debt. The lender would have to agree to this arrangement because they stand to lose money. But most lenders find that a short sale is actually cheaper than the cost of foreclosing on a home and so they usually give their approval to this setup.

This type of sale favours all parties involved. The lender can reduce its losses from mortgage default significantly. The homeowner can successfully prevent foreclosure which will decimate their credit score. The buyer is assured that they are getting a property on a discount.

Information on short sales is available through licensed real estate agents as well as in online foreclosure listings web sites. Before setting out to search for one there are a few things a buyer needs to be clear on. They have to know what they want or what type of property will meet their housing requirements. They also have to know how they are going to pay for the property.

Assessing the Value of the Condo

Buyers should be able to determine the financial impact their purchase will have on their finances. If they intend to pay for it through a home loan, it is best to have a pre-approval certification from their bank or any other mortgage provider before making an offer. They should also keep track of the incidental expenses involved in purchasing condo properties for sale such as repairs, back taxes if there are any, association dues and other condo fees.

How to Quickly Determine the Value of Commercial Property for Sale

The value of the commercial property for sale is determined by using some simple formulas that are based upon the amount of net operating income that the property produces each year. So when you are looking at a commercial property for sale, one of the first things that you’ll want to ask the broker for is the profit and loss statement.

Some brokers who have listed a commercial property for sale may refer to this profit and loss statement as an IPOD, or income property operating datasheet. Once you get the IPOD, or profit and loss statement, you can then compare the information provided by the broker or seller to your other sources to help determine what the real numbers are. The challenge when looking at any commercial property for sale is that the broker and/or owner will often tend to exaggerate the amount of income that the commercial property for sale produces while also trying to minimize the number of operating expenses that are reported.

How to Determine the Value of a Property for Sale

The reason for this is simple. The value of any commercial real estate is based on the amount of net operating income the property creates each year. Each additional dollar of annual income increases the value of the property by roughly ten dollars, depending on where the property is located, and how old it is. Note that this extra net income can come from either getting additional revenue in rents or from reducing expenses by managing the property more efficiently.

Once you understand that owners of commercial real estate will tend to present unrealistic numbers in an attempt to get a higher price for their property you’ll understand better why it’s necessary when looking at any commercial property for sale to get to know the market you are investing in. When you know what the rental rates in an area tend to be or what the typical expense ratios are for a twenty-five-year-old apartment building then it’s much harder for the broker or owner of commercial property for sale to attempt to pull the wool over your eyes.

Verifying the Income and Expenses

The first step in verifying the income of commercial property for sale is to ask for the rent roll. The rent roll is a list of what each apartment, self-storage unit, mobile home lot, or office space rents for. Make sure that you get the actual rent roll because the owner or broker of commercial property for sale may try to give you a Pro-forma rent roll instead of the actual rent roll. Pro-forma means that there is an expectation, realistic or not, of getting higher rents than the property is currently getting. My response to this has always been, “If you raise the rents to match the Pro-forma, then we’ll use the higher income amounts, otherwise we’re going to base our valuation on what the property is currently producing in income.

When looking at the expenses from a commercial property for sale, remember that you’re trying to come up with the actual amount that it will cost you to operate the property rather than what the seller’s expenses have been. So while it’s helpful to know exactly what the seller’s costs have been, I’ve learned NOT to rely on the information provided by the seller when looking at a commercial property for sale because this information is almost always inaccurate.

A Simple Formula to Use for Expenses

The expenses will vary depending on the type and age of the commercial property for sale. For example, if you are looking at buying a Class C apartment building which is at least twenty-five years old, then the expenses will run between 45 to 50 per cent of the collected income each month. The collected income, known as the Effective Gross Income, is what’s left after the cost of vacancies is subtracted from the total amount of rents on the rent roll from the commercial property for sale.

The final step in determining the value of the commercial property for sale is to divide the net operating income by the capitalization rate, which varies from about 6 to 12 per cent depending on the type of property, the age, and the location of the commercial property for sale. The fastest way to get an idea of what capitalization rate you should be using when looking at a commercial property for sale is to ask another broker who is not involved in the transaction.

Using Escape Clauses to Limit Your Risk

Another way of protecting yourself when looking at any property for sale is to make sure that your purchase contract allows you a period to get out of the deal if you are not comfortable with anything that you find. Done properly, you can often tie up a property for 60 to 90 days so that you have time to accurately determine the real value. This makes it easier to look at commercial real estate because you can get out if you have the right escape clauses.

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