Reposition For Profits

One of the best strategies an investor can use to create profits with commercial properties is to purchase fully depreciated buildings and reposition them. But what does it mean to 'reposition' a property?

Repositioning a property is when the use for the property is changed in order to suit the new demographic of the neighborhood it is located in. Many times we think of this when we see older shopping centers go vacant because the grocery store moved down the street into a brighter and more modern facility.

The owners of the vacated center will continue to attempt to attract the same clientele they had before. After a while the traffic count dies and more tenants leave. Before long the center is nothing more than a dilapidated shell.

Savvy investors can use this to their advantage and obtain the property for a fraction of its future repositioned value. Many investors struggle with this concept, the thing that holds them back is financing.

Stuck in the rut of lthinking that arge down payments will be required and having limited vision, investors fall prey to the old thinking that banks will not lend on half vacant buildings. But that thinking is wrong.

There are lenders that will lend based on the future stabilized value of the property. These loans are very similar to the more traditional Acquisition and Development loans. The only difference is that after the property has been stabilized, these loans convert into long-term permanent financing.

The loans are based on the LTV and the LTC (Loan To Cost). The down payment is usually a percentage of the cost to purchase the property, fix it up and get it leased and can be as low 10% down.

Repositioning a property and using this type of financing strategy can be a great way to get started in commercial real estate. Don't let the down market stop you from getting out there and making offers, money is available today!

Michael Gross is the author of this blog. He is President of Dividend America Mortgage and has been an appraiser, builder and Realtor. He uses all of his knowledge and experience to help others gain wealth through real estate investing. Contact Michael at 770-350-7373 or email your questions to mgross@dividendamerica.com