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Commercial Real Estate Lapse, Rebound, Relapse: Sunday Morning Thoughts 02 June 2013

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What caused the lapse in the commercial real estate market?    The_Kitchen

Many would think sub-prime lending, but that is not the cause.  Commercial lending is based on the income of the property.  The lapse has been caused by easy lending.  Similar to sub-prime lending in that it was easier to get a loan and purchase a commercial property, without regard for knowing how to manage a commercial property.

Many people had never learned about managing commercial real estate but entered into the arena believing they could handle the demands of commercial property.  Many of the properties were multifamily apartments.  Although many of the investors sold off items from the apartments, such as , microwaves, refrigerators, washing machines, dyers, etc. and then skipped out on their loans, and leaving in their wake the rubble of what was once a viable housing community.

Many of these properties were left in a horrible state, but was it really that horrible?

Not necessarily so.

It had been noticed that many once viable properties, in thriving rental areas, had fallen into low occupancy, disrepair, and higher than normal expenses due to mismanagement; with many units in a community becoming uninhabitable from some type of damage such as fire, or property destruction such as knocking holes in the walls.

The lapse was a time of finding a plethora of value-add properties, which are still present at this time and many more like type properties entering the commercial market weekly, if not daily for lucrative rental areas.

Next Sunday’s post the Rebound part II.

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