| Posted by david on June 3, 2010 |
The last thing I want as an investor in real estate notes is to sit back and watch a perfect opportunity fly out my window. It’s important to be cautious with your purchases of commercial notes – complete your research and due diligence, know your budget parameters, know your preferences, talk to your note broker… But how long is too long to sit on a deal? How many other investors are out there searching for the same assets, with the same cash flows, in the same locations? Well, in fact, the volume is simply staggering. I’ve seen some notes with preferable discounts and profitability slip through the grasps of some of our note buyers because they failed to prioritize the purchase. These investments will not lie down and wait for your checkbook – they’ll be snatched up by the next savvy investor to come along looking for a foot in the door of this market.
This brings us to my next point – the dollar amount of your offer (you, being the buyer). Forget the low-balling. If a bank has a commercial note they’re willing to sell at a 15-20% discount, don’t offer 30 cents on the dollar – they won’t even return your phone call. Banks view these offers as dead ends. They’re not looking for negotiation battles; instead, they want these notes off their books quickly and quietly, and they recognize the number of investors in the market. Making foolishly low offers is, therefore, almost as bad as making no offers at all.