Investing in distressed commercial properties in New Jersey can be lucrative – but may pose several potential challenges.
Often sold at a discount due to financial or legal troubles, distressed property can provide a healthy return on your investment or lead to catastrophe.
Possible rewards to consider
Investing in distressed commercial real estate can yield several benefits. Examples include:
- Lower purchase price. Distressed properties can be acquired at significantly lower prices than non-distressed ones, leading to higher profit margins when rehabilitated for sale or lease.
- Value-add potential. These properties often require renovations, providing an opportunity for improvements that add value and attract interest among buyers or renters.
- Less competition. Many investors shy away from distressed properties due to the complexities involved, translating into less competition and more opportunities for those willing to navigate the challenges.
As you can see, the possible rewards can be substantial for those prepared to invest in the property.
Potential risks to weigh
Unfortunately, there are also a few risks to consider before you buy distressed commercial real estate.
- Legal complexities. Distressed properties often have a complex legal history, including foreclosures or disputes with previous owners, creating time-consuming and costly entanglements.
- Unresolved liens. Liens on distressed properties, such as unpaid taxes or contractor bills, can be a problem, and clearing them is typically an expensive and lengthy process.
- Property condition. Distressed real estate has often been neglected and may have significant damage, requiring deep investments of time, money and effort to make the property sound.
While the potential rewards distressed property can offer are enticing, ignoring the risks is dangerous. Someone with a background in New Jersey real estate can help you compare the risks and rewards unique to your situation, leading to informed decision-making.
