rules of thumb • buying real estate • Susan Halas

There was quite a bit of interest on the Bibliophile Mailing List in the steps to buy commercial real estate or to get a long term low interest loan guarantee to finance biz activities.

A good place to start gathering info is Small Business Administration. At that site they’ll ask you to type in your state and zip code. Even if you don’t plan to buy or borrow anytime soon I strongly recommend you browse what’s available and what kind of paperwork is involved.

Typically loans for commercial properties from private sources like banks and commercial lenders are at HIGHER rates of interest (now over 7% and sometimes much higher) and shorter lengths of time, often 5 to 10 years or LESS and then need to be refinanced. But with special programs backed by fed, state, local governments and non-profits it is possible to get the rate down , sometimes quite a bit down, and also extend the term to as long as 20 years. The key is the relationship with the lender and that the borrower (that’s you) provide extensive documentation /paperwork on ability to repay.

Also, there are many situations where it is more advantageous to buy a residential property which will be partially used at a later date for business purposes, home office, internet biz etc (zoning permitting). Typically there are many programs that allow quite a bit of leverage for first time or special classes of home buyers (minority, women, single parent, vets, etc. etc). The bad news is interest rates are rising across the board so money is getting more expensive.

THE GOOD NEWS IS the market is dropping like a stone, the bubble is finally deflating and it’s going from a pure seller’s market in which there is no inventory and everything that comes to market sells right away at higher and higher prices to a buyer’s market where’s there’s plenty of inventory and prices are headed DOWN DOwn down…………….That doesn’t necessarily mean prospective buyers will find a bargain, but your chances of finding something affordable and financiable are improving daily. But you have to be ready.

Right now we are going through a period of ADJUSTMENT in which the sellers have yet to realize that what they expect to get for their priceless real estate is not as much as the magic inflated number they have in their mind. Sellers are still thinking that even though the market is going down in other places, it will not go down here (fill in your locale). But this is not true, it is heading down and the questions is just how low will it go and how fast and how much pain will people who have those ARMS (ajustable rate mortgages) endure before they cut and run?

Sophisticated investors, people who have funds in hand in cash are waiting, and hoping it sinks even faster and that the pain comes rapidly (the best scenario for buyers). For bibs most of whom I am thinking will be toward the low end of the spectrum and not experienced real estate investors and not be sitting on piles of cash, it’s still a good trend….. as new inventory floods onto the market and stays there for ever longer periods of time, the prices will go down and the terms that the seller will allow and carry will also become more flexible.

SUSAN’S ADVICE: If you ever thought about buying real property get your paperwork together NOW and wait for the distress which is on the horizon. Think of it as an opportunity.

Did I mention the part about finding the right agent and not doing it by yourself? Anyway, it’s complicated to buy real property, especially if you don’t do it all day every day, so along with documentation find somebody LICENSED, a person with experience and a track record you like and trust to work with you. It may take quite some time to get the numbers together and qualify, because most of us are self employed and do not have conventional income streams, (w-2, regular pay checks), but trust me, it will be well worth it.

Susan Halas @ Prints Pacific, Ltd.
(book dealer, commercial property owner & licensed Realtor®)

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