Although many people are familiar with the term flipping with regard to residential homes, flipping commercial real estate also has some benefits?if done properly.? Flipping occurs when a real estate investor purchases an investment property and then quickly resells it for profit.? In today?s distressed commercial real estate market, the opportunity for flipping investment properties is greater than ever.
Types of Commercial Real Estate Flipping
There are several types of commercial real estate flipping.? The best-known way, a wholesale flip, occurs when an investor purchases a commercial property and sells it quickly to another investor, sometimes prior to closing.? The investor could also purchase a property at a low cost and then sell it at a higher price, which can occur in a market with rapidly rising property values.? In commercial real estate, the investor often puts the property under contract and locates a tenant with the option to either close after the tenant moves in or resell the property to another investor.? Because commercial investors prefer to purchase buildings that are at least 50 percent occupied, tenants can increase the value of the building and make it easier to flip.
Fix and Flip
Another common method used in flipping commercial real estate is known as ?fix and flip.?? Investors purchase commercial real estate that is in disrepair, normally at a price much lower than the market value.? They perform the renovations necessary to bring the building back to rental quality and then sell the building at a profit.? In some cases, flipping commercial real estate can restore a commercial area and help raise property values in the neighborhood.
Commercial Back Flips
In some cases, the investor can choose to work with a property owner whose commercial property is in default or with the owner?s attorney in an effort to let the current owner remain in their property.? In some cases, the investor may work directly with the lender.? When flipping commercial real estate in this manner, the investor purchases the property and resells the property back to the original owner for a higher price, holding the mortgage for a set period until the investment is fully paid.
Flipping commercial real estate is another method for obtaining a return on investment more quickly than in other methods of commercial real estate.? Visit www.cmrei.com for more information on my real estate training.
Source: http://blog.cmrei.com/2012/02/16/flipping-commercial-real-estate/
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