If you are one of those forward thinking people out there that are trying to capitalize on the recent down turn in the real estate market, then you probably have been looking into foreclosures as a fast way to make a buck.  For home foreclosure listings this can most definitely be the case, but a commercial real estate foreclosure offers a bit more of a challenge.

Why A Commercial Real Estate Foreclosure Is Risky

There are several factors that make investing in a commercial real estate foreclosure very risky.  The first reason is that when you compare commercial real estate and home real estate you really are looking at two completely different categories of property ownership.  In residential real estate, primarily it is used as a home and not a place of business.  In commercial real estate, it is wholly dedicated to business.   Now if the property is a commercial real estate foreclosure, then you can bet that whatever business was located there failed and more than likely there is a reason for this.  If the reason for the failure has not changed and you are looking at an investment opportunity in the commercial real estate foreclosure, then you need to think long and hard about what you are getting yourself into.  I would be especially leery of any commercial real estate foreclosure that looks too good to be true because more than likely it is.

The next reason you want to be very careful of a commercial real estate foreclosure property is there probably was not anyone every living there.  At least with a residence you can assume that any damage caused by the people could only be so much as they were living in the property, this is completely not the case with a commercial property.Years and years of neglect and misuse could be hiding in the establishment as the owner tried fruitlessly to use all his money to keep the business a float.  Obviously since the commercial real estate foreclosure is in effect this was not successful, and you can bet that the previous owner stripped everything he possibly could out of the property.

It is for these reasons I would be really careful before plunking down my hard earned cash on a commercial real estate foreclosure.  You may think otherwise, but I advise caution.  In the end the decision is up to you, whichever way you decide do your research completely.

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For those selling large commercial real estate deals, times may be a bit tougher on the news coming out of Wall Street. The large insurance companies, not known for their risk taking, are looking at impairments to their portfolios of billions of dollars due to real estate losses.

What this means is that new investments from these cash rich companies will be held off for a while until the market settles. One of the biggest sources of cash for large real estate deals, the insurance companies role is even bigger in times of tight credit.

Look for fewer commercial deals to be completed as the year winds down and the insurance companies try to keep a lid on real estate losses.

The most recent such sign for the life insurance firms was a Goldman Sachs research report that came out on Monday, warning that Prudential Life Insurance Co.’s exposure to mortgage-backed securities and real estate loans could trigger anywhere from $1 billion to $4 billion in impairments – essentially making a serious dent in its excess capital. Met Life, it said, could realize between $1 billion to $6 billion in similar impairments, although these losses would be mitigated by the $2.3 billion raised in new capital.

The concern by some is that life insurance companies may dial back their appetite for real estate investment even further, especially as such weak spots in their portfolios become apparent. “At the beginning of this year a lot of insurers decided that the risks in the market meant that they would cherry pick the best deals and then withhold investment until the market improves,” via Globe Street

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Life Insurance Companies Bottom Line Hurt By Real Estate Investments

Source: Commercial Real Estate