Actually there is a little bit of a twist to that statement.   The bigger you are, the tougher it is to get money.  That is, if you buy a billion dollar project, or several projects to make up that billion, you probably will have a heck of a time getting the financing to complete the purchase.

Why you ask?  Why is because nobody seems to know how to evaluate the safety of a loan.  All of a sudden the major lenders in the United States, especially Wall Street, no longer believe that they actually can tell a good loan from a can of beans.  This is a strange world we live in when the supposedly best and brightest don’t have any faith in their own reasoning abilities.

Now the real twist comes.  Remember those people who needed a loan but the banks looked down on them?   Well, suddenly they are the only ones who can get financing.  If you need to borrow $250 mil. for a project on main and main with solid gold tenants you can’t.  However, if you need to borrow $2.5million for a nice little shopping center in some suburban setting loaded with mom an pop tenants, you can.

Strange as it may seem, the smaller investor, the guy next door, can actually buy real estate more readily than that major institutional investor.  The catch is, and there is usually a catch, this borrower, who is now the apple of many a banks eye, is very often afraid to buy because it may be the wrong time in the market.  If this investor does not wake up he may miss some pretty terrific interest rates on loans that will ensure cash flow for many a year to come. 

Local bankers are waiting with outstretched arms for the missing investor.

The stock market dropped then has regained slightly but is still significantly down. GM announced a $39 billion loss for last year, Fed Chairman Bernanke has said that he is prepared to keep reducing the bank lending rate to keep the economy moving and the President and Congress are trying to decide how big a stimulus program to institute.

Things sure seem bad. Strangely enough though, the commercial real estate market is still chugging along like the little engine that could. True things are not like the recent past but they aren’t like the dark ages of the early and mid 1990s either.

Rents are still going up, occupancy levels have decreased in office properties due to the mortgage companies that have bailed but retail and industrial occupancies are still hanging in there. Apartments are still doing well in general. However, that market is skewed with all of the high end units that have come on stream in the past couple of years together with the condos that couldn’t be sold being converted to apartments.

Right now it seems like the Orange County commercial real estate market is going to squeak through the current economic mess in fairly decent shape. There are no mass foreclosures going on, in fact there are almost no foreclosures of any kind going on in the Orange County commercial real estate market. You can prove the point by calling any major bank and asking for a list of their commercial foreclosures. There aren’t any.

So if you are an investor in real estate, don’t get depressed. Maybe you shouldn’t read the newspapers either.

Can you imagine how well you could have done if you bought just a small fraction of the commercial real estate that you looked at since the year 2000? You might be too busy enjoying your yacht in the south of France right now to read this article if you had.

Just what is a bargain when you are dealing with commercial real estate? Is it 10%, 20% or 100% below the average price for a similar property? Probably any one of those numbers would constitute a true bargain. However, how probable is it that one can actually buy the property significantly below market price?

I submit that it is not very probable. In fact most people that have doubled, tripled, quadrupled or increased their net worth even more than that may well have paid market price for their property. The money is made on buying smart and projecting income prudently. It does not need to be made on “stealing” property.

Buying or selling prudently in a down or up market is key for investing into commercial real estate. Otherwise, if you are waiting to take action for just the optimum conditions you may grow old waiting to do it. You will also miss a great many opportunities along the way.

More about opportunities another day.

Let me know what you think about buying commercial real estate.

Timing is always important in selling but it is not the end all that people think it is. One’s own circumstances are the most important determining factor in deciding when to sell.

Some people simply must simplify their lives and cannot cope with the complexities of their properties. Some people are retiring and they don’t have any heirs that can adequately watch over the properties, or if they do they are too far away. Some people want to do a 1031 tax deferred exchange into another type of property for a myriad of reasons.

These people often need to sell now, and probably should not be trying to time the market so they can sell at the exact right time. For one thing, I don’t know anybody who can predict when the exact right time is. I wish that I did.

I have spoken with a great many people who have tremendous equity in their properties but still are afraid to sell. With the federal capital gains taxes low and the ability to exchange into another property or into a tenant in common property it may be accurate to categorize their fear as somewhat irrational.

Selling at a loss is always a tougher decision. However, selling with a good gain and return on the invested dollar is usually not a foolish thing to do. Waiting until the market peaks may be foolish if you have other reasons for selling. Chasing a down market while holding on to one’s property probably is foolish.

Let me know what you think about selling commercial real estate.