In Part 1 of this series, we looked at the pros of buying from a commercial real estate auction. Today, we will be looking at the negative aspect of this process so you can determine if it is right for your business. Well there are a lot of benefits to come from commercial real estate auctions, like saving money and expanding your portfolio, the fact is this process does not work well for everyone.
In most cases, you are not able to do an inspection on a piece of property before you purchase it with a commercial real estate auction. You are not even allowed to go inside. You have to make judgment calls based on what the exterior of the building looks like and what you can see through the windows. Of course, banks do this as a way to hide potential problems that might come up, so you need to be aware that those problems can and most likely will exist. That is why it is important to get a good deal on a piece of property before you buy it, to leave yourself leeway for problems that may arise.
Potential To Overpay
Even though a lot of people get great deals on properties from commercial real estate auctions, there are just as many people who end up overpaying every time they go to an auction. If you get in a bidding war with someone else who really wants a certain piece of real estate, you may end up spending more than you wanted to or more than you logically should have on a piece of property. You have to be careful and set logical limits for your bids so that way you can maintain your profit margin.
Aggressive Betting Markets
There are certain parts of the country, or even certain parts of your community, that will be more competitive than others. If you live in an area that is known for having good commercial real estate, you may not be able to buy as much as you want to because the prices for the bids just get too high. You will have to test the waters to see what the bids are like near you.
At the end of the day, it is worth attending at least one or two commercial real estate auctions to see if they fit well for your investment strategies. You never know what you’ll be able to find until you make the effort to go to look for it.