Using the Web and social media to sell real estate

In a previous article I have already reported that Llenrock Group counts on international real estate funds to come to the rescue and this might very well be the case (see “International Investors Coming to Rescue the US”). But what does this mean to you? If so many banks collapse all at the same time, many businesses will also go due to the lack of financing to support them and the market will spiral further.

Small community banks are at risk due to the coming commercial foreclosure wave.

And the main problem won’t be with the big office buildings, but rather with the small office and apartment buildings or the small strip malls. So we need to facilitate a solution by directing any small commercial property owner that is facing foreclosure, and they are going to be many, to the right sources to solve their situations in an orderly and timely fashion.

This might include loan modification, short sale or partnering with a domestic or an international real estate investor who can help them get refinanced and survive, in exchange of equity. You can direct people to this blog that will keep them informed of the options they have and the way to use them. And you will have made a big service to yourself and to your community.

Roberto Mazzoni

P.S. The commercial real estate foreclosure wave is something we can deal with. Refer anybody you know might be in trouble or interested in becoming a solution provider to the MEETUP we are holding in Tampa on June 9.

Foreclosures are the main focus for real estate investment activities both in residential and commercial. They allow to garner significant benefits from acquiring a distressed property at a very discounted price and turning it over so that it regains most of its current value and yielding a substantial return in the process.

Commercial foreclosures bear an important difference from residential in that they offer two main ways of changing the value: fix what is broken (just as in residential) or change the property use (which is usually not an option in residential. This doubles the exit strategies and the earning potential.

As far as fix what is broken is concerned, you can rehab the property, bringing value to the actual structure, or you can improve its management and its marketing presence. When “flipping” a house, you can only work on the house itself, with some cosmetic or maybe even some serious rehab work (like replacing the A/C or redoing the the roof and so on).

On a commercial property you can fix the property inside but usually you get the best return by “massaging” it from a management perspective: improving the service to your tenants (office or apartments), increasing rent, reducing maintenance costs, improving the marketing efforts and thereby reducing vacancies.

You have therefore much more latitude of action so to bring about a substantial change in value but you also need to have the experience to produce such a result. It is all very fine to “flip” commercial properties just on a wholesaling basis: you find a deal and negotiate it down to a certain price and then sell it immediately to somebody else for an higher price, but still you must know what your final buyer would need in order to provide her a good deal that will also make you money.

And you must be able to understand the need of the seller and become a problem solver for her as well. Look first of all for problem properties: those that need repair or those which are vacant, as they will be acquired at much lower price than pristine properties going in foreclosure.

Remember, you always have two exit strategies possible: bringing the property back to a workable condition or changing its use altogether. Even if you might not be an expert in this field, your final investor will know what to do if you bring her a good deal. And a good deal is measured not only by the price but also by the terms for that price. There is a saying: “You can always get your price if I can get my terms”.

Commercial foreclosure is a “problem solving business” and you’ll be working with sellers that are sophisticated enough to understand the value of a solution when they see one. So look for properties that are in bad shape and start working for them. One word of caution: avoiding hotels in Florida, the market is just plummeting and it often takes a super-hero for turning them around. Small office and apartment buildings, small strip malls should be your main focus.

Roberto Mazzoni

P.S. If you want to know more on how to look for deals that can make a big payday, join our Meetup group.

Foreclosures are still abundant all around Florida and people wonder when the market will ever come back, but there is news for them. International real estate investors are making a big difference in some areas of the state and Sarasota has already begun to recover and has become a seller market in some specific neighborhoods.

A beautiful villa on the Gulf of Mexico - 3410 Flamingo Ave Sarasota

It is funny because the Sarasota market stopped abruptly few years ago when the bubble burst and suddenly prices plummeted to half the value just overnight. There was no gradual descent and now it is the first to pick up thanks to the heavy positive effect of European capital coming over. But why are Europeans preferring Sarasota to other locations in Florida or the US?

The city has definite an European flavor when you go to its key locations and there already major communities from different European countries. There are whole neighborhoods that are devoted to specific nationalities and languages. Like for example there is a huge and upscale gated community that has Italian street names, Italian restaurants, Italian tradesmen and so on. And you find also strong British, German, Polish, Russian communities.

Real estate professionals in Sarasota have heavily invested in services which are friendly to the international real estate investor: almost all major real estate brokers demand that their agents know and speak fluently at least two languages, there are attorneys and tax consultants that can provide specialized services to foreign nationals and you also find currency exchange services that can lock your exchange rate at a certain date when you are ready to buy real estate.

And, most importantly, you have banks that are willing to lend to foreign nationals, which is a rarity today in the US real estate market. The combination of all these elements, is pulling in huge amounts of capital from Europe and Realtors are frantically active in Sarasota. I have just been there and seen it personally. It is a good model that is worth imitating.

Roberto Mazzoni

Florida is becoming the center of serious interest from international real estate investors. Starwood Land Ventures, an international real estate investment firm, has just completed a deal with one of the major developer in the USA, Lennar, for the development of more than 2,700 home sites in 38 communities across Florida. These are land parcels that constitute one of the most desirable portfolios come to market in years. Starwood Land Ventures had acquired the whole package at a bankruptcy auction last January and now it is planning to work with Lennar to develop first-time homebuyer, master planned, active adult and premier golf course communities in the Tampa, Orlando, Jacksonville and Southeast Florida markets.

The biggest international real estate deal in Florida will create new development.

This means that development activity is beginning again with single-family homes, townhomes and garden villas priced in the low $100,000s of the above mentioned markets that are already rich in foreclosures and discount properties. The plan apparently is to undercut the offering from banks that provide repossessed or shortsale properties requiring various degrees of repair, and providing instead competitively priced single family homes that are brand new and ready to be purchased by first time home buyers.

Lennar hasn’t disclosed the timing of the project, but it is already remarkable that international funds are triggering new massive development efforts in the state of Florida.

Roberto Mazzoni

One interesting story comes from Riviera Beach, a Florida resort just North of West Palm Beach. It is a pretty small place built around a harbor on the Atlantic Ocean and with a very nice beach. Wikipedia reports that it “is predominantly an African American city” and “consistently has crime rates well in excess of the United States average and is also notable for its high levels of poverty”.

But, as it sometimes happens in other very poor cities or neighborhoods, Riviera Beach became the target for massive redevelopment so to create areas of very expensive real estate with the objective of eventually turning the whole market around. One of these developers was Cornerstone Group from Hollywood that created a whole gated community called Marsh Harbor with 402 units and various amenities like a fitness center, lighted tennis court, swimming pool and heated spa.

One of the townhomes in Marsh Harbor, apparently the bigger one, sold as a shortsale by Palm Beach Florida - Real Estate

They were selling these townhomes for as much as $ 310,000 in 2007, now these same townhomes are worth between $55,000 and $75,000, according to the County Property Appraiser and to the current listing prices of the many shortsales in the community, and they are very difficult to sell. So Cornerstone Development will auction off 64 of these townhomes on March 13. The first 20 of these townhomes will be sold “absolute” to the highest bidder regardless of price, at the highest discount possible, as a push to get rid of the remaining inventory. The remaining ones will be sold to the highest bidder, with prices subject to approval by the seller.

It is the exact same concept as used for major stores: where you have low cost products that are being offered at a loss so to get people through the store and getting them to purchase other more profitable merchandise. One would never expect to see the concept applied to real estate, but times are changing and any marketing tactic goes, apparently.

Roberto Mazzoni