I've noticed the same with commercial properties for sale in declining areas. You can pick a building up for peanuts and the rent makes for amazing cash flow - if you can fill it. I haven't actually had the nerve to pull the trigger on any of these amazing deals because my fear is that the property could sit vacant for years and vacant commercial property is very expensive to hold.
I'm considering purchasing underperforming CRE and converting it to another use. I.e. large vacant building into small, efficient apartments. What you describe seems to be the only type of real estate not selling so hot in comparison to almost all other real estate.
Basically, taking something that can't be reliably rented, and converting it to another use which is currently seeing historical demands?
Any thoughts on this?
1. What’s the current zoning situation? You might have to get it changed. And then you’ll probably want complementary zoning nearby. (In other words, you probably don’t want to be a small island of multi family surrounded entirely by industrial).
2. Is it livable? Are there shopping, restaurants, schools, and all the other creature comforts most people want within a reasonable distance (or will there be in the near future)?
3. What has the land been used for in the past? (And not just the previous owners. Go back as far as you can.) Stay away from anything chemical (including gas stations and dry cleaners).
4. Do you have the money to build out all the units at once, or are you relying on the sales of the first few units to finance the rest? Are you going have to clean up asbestos, lead paint, etc?