Cash Buyers: Your Complete Guide to Selling Commercial Real Estate for Cash
According to statistics, the commercial real estate market generated upwards of 1 trillion dollars in revenue so far this year.
With interest rates reaching normalization, many buyers might be leveraging financing to buy into the market at this time.
Simultaneously, there are also a lot of cash buyers out there looking to capitalize on their position of liquidity. If you are looking to sell your CRE investment property for quick cash, this can be to your benefit.
However, before you list your asset you will need to find out the pros and cons of selling CRE property for cash—as well as how to attract the best cash buyers.
Read on to find this out.
How Many Cash Buyers Are in the Market?
According to NAR, up to 30% of purchases in the CRE market are cash buys. This is a substantial percentage.
With interest rates at an all-time low, it may seem surprising that so many cash buys are taking place. However, interplaying into this is the fact that CRE market values are high, which can incentivize buyers into offering cash to increase their chances of closing.
Additionally, recent research by Deloitte shows that investors in the US are planning to increase their capital commitment to commercial real estate.
For these reasons, it is likely that low interest rates will not decrease cash transaction all that significantly, as buyers will wish to have an edge in these competitive market conditions.
Pros of Selling for Cash
Cash sales have a number of advantages for CRE sellers. These include the following.
Faster Closing Time
Banks and other lenders are often notoriously slow to provide financing for commercial real estate. The complications of financing processes on buyer’s sides can eat up a lot of time and cause unforeseen delays in closing
Cash sells, however, do not have this problem.
Enhanced Cash Flow
With a fast closing time, you will also be able to enjoy quick cash flow. Depending on your circumstances this could be of great benefit.
Reduced Opportunity Cost
If you can pull off a smooth and fast cash sale of your commercial real estate, you might be able to open yourself up to a new and lucrative CRE opportunity. If this opportunity were missed thanks to a drawn-out closing process, this would qualify as opportunity cost.
Cash Selling Cons
While cash sells can have a number of advantages there are also a couple of downsides to cash sales of commercial property.
Sellers are attracted to cash buys because they usually pose fewer hurdles than financed purchases.
As cash buyers are sought after by sellers in both commercial and residential real estate—this can leave you with fewer potentially interested parties.
The Need to Negotiate
Negotiations are often necessary to facilitate the sale of one’s CRE investment. However, when it comes to cash sales you will need to be even more prepared to engage in accommodating negotiations.
Successful negotiations with cash buyers can push your asking price below what you had intended, which is another associated negative that can come with CRE cash sales.
How to Attract to Cash Buyers
One of the guaranteed ways to secure a cash buyer is to target property investment companies. These companies have the capital on hand to purchase CRE properties on behalf of their clients for cash.
If you wish to go beyond this, you can also research recent sellers in your area by utilizing public records. These investors will likely have good cash flow and could be looking to re-invest.
And lastly, always remember that when aiming for a cash sale on your CRE property, you will probably need to negotiate to keep the interest of cash buyers.
If You Have Any Questions, Speak to Us
If you need inside advice on the Boston commercial real estate market—do not hesitate to get in touch, and we would be happy to share our knowledge about cash buyers and transactions with you.