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What Are Distressed Properties?

When you hear the term “distressed properties,” you might imagine a home or building in a state of complete disrepair. The phrase evokes an image of a property falling apart, but in reality, this term means something a bit different.

A distressed property refers to real estate property that’s almost in foreclosure or owned by the bank. So, distressed, in this case, refers to the financial situation, not the actual physical state of the property.

Distressed properties appeal to many potential real estate investors because they’re an excellent way to get a great deal on a property. However, there are some cons to purchasing one.

This guide from Hokanson Companies goes over important information on distressed properties, including what you need to know about the benefits and drawbacks.

Understanding Distressed Properties

Distressed properties allow potential buyers to get a discount. In the best-case scenario, the home is still in decent condition, although this isn’t always the case. Some commercial properties in foreclosure are in need of major renovations, but it really just depends. Generally speaking, there are two main reasons a commercial property might go up for distress sale.

  1. Short sales: A short sale is conducted by the property owner to avoid foreclosure. If the owner feels they can’t get ahead on their payments and owe more than the property is worth. The buyer will sell the home for less than its worth, which results in a good deal for the buyer purchasing the distressed property.
  2. REO Properties: REOs, or real estate-owned properties, are places that don’t sell when they go up for auction the first time. Buyers can often get a big discount as the lenders want to let go of the property and don’t want to be responsible for any necessary repairs.

What Is Foreclosure?

While mentioned briefly above, it’s still helpful to fully understand what foreclosure means. Foreclosure is when any mortgaged property, such as a home or business, is repossessed by the lender. A foreclosure occurs when the person responsible for the mortgage doesn’t keep up with payments. Most of the time, the lender is a bank.

While distressed properties are often residential, they can also be commercial. Commercial foreclosure functions similarly to residential home foreclosure.

What Are The Benefits And Risks Of Purchasing Distressed Properties?

The most apparent and primary benefit of buying a distressed property is the discounted price. However, there are some risks of purchasing distressed properties; these include:

  • You have to buy the property as-is: In most cases, you’ll purchase the distressed property at auction or in a short sale. This means you probably won’t get a chance to inspect the property, and you’ll have to take on any issues that it may come with.
  • You may encounter purchasing delays: Because you’re buying distressed property from the lender, they aren’t always in a hurry to complete the sale. This means the actual closing process can take months.
  • You may have to do significant repairs: If you want to rent out the property, it might need repairs to be occupiable. This can mean months or years of renovations, especially if you plan to do it yourself.

With these drawbacks in mind, let’s consider when buying a distressed priority makes sense.

Who Should Purchase Distressed Properties?

While distressed properties might not be the most logical choice for the business owner, they tend to make sense for many commercial real estate investors. Investors with experience flipping commercial properties can handle the risks of a distressed property, and it can be an excellent way to make a profit if you take the right approach.

How Do I Find Distressed Properties to Purchase?

If you’re interested in purchasing a distressed property, one excellent option is to reach out to Hokanson Companies for assistance. Call us today to learn more about our available commercial properties or to view our portfolio.

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Jay B. Gehl

Vice Chairman of the Board
jbg@hokansoninc.com

Jay Gehl serves as Vice Chairman of the Board for Hokanson Companies, Inc. With over thirty-two years of experience, Jay has been directing and managing his team in the areas of strategic planning, corporate advisory, build-to-suit assistance, tenant representation, financial analysis of leases, and brokerage. Attention to detail and unparalleled customer service has been the foundation of the relationships with the institutional customers served by Hokanson Companies, Inc.

Jay has been instrumental in assisting several major corporations in establishing or relocating their corporate headquarters, including Vectren Corporation, Fifth Third Bank of Indiana, and Firestone Building Products. In 2005 and again in 2013, Jay was honored receiving Firestone’s Inner Circle of Quality Award. The prestigious “Q” Award is presented annually to a provider that demonstrates excellence in service, commitment, and innovation.

Jay and his team are the leading experts of medical real estate services in Indiana. No other firm in Indiana has the depth and countless years of experience in healthcare services. Hospital Administration and Physicians alike attest to the outstanding assistance they receive with build-to-suits, transactions and various projects.

Jay’s team excels in Investment sales with multiple transactions each year ranking them annually as a top producing entity. These services have helped corporate client’s real estate needs in over twenty-seven states from coast to coast. He also served the international needs of his clients in six countries including a facility in Turrialba, Costa Rica with 230,000 square feet on 35 acres.

Stephen P. Hokanson

Chairman of the Board and Chief Executive Officer, CRE, CPM, RPA
sph@hokansoninc.com

“We put our clients’ interests first… always.”

Steve Hokanson serves as Chairman of the Board and Chief Executive Officer of Hokanson Companies, Inc. He began with HCI in 1971, and has been its President and CEO since 1983. When Steve joined the organization, Hokanson Companies was primarily focused on property management. Under Steve’s leadership, Hokanson Companies has grown to include four active divisions and five separate disciplines.

HCI currently manages over 6 Million square feet under its property management division, and has over $100 million in project management and development. Its sales and leasing division closes over $100 million in sales and leases annually, while they continue to be very active in construction management for its various clients and out-of-ground buildings.

In addition to his role at HCI, Steve has also fulfilled numerous civic and professional leadership roles locally, statewide, and nationally, including the International President of BOMA International 1991-1993. Steve’s other accomplishments include being selected for the Stanley K. Lacy Executive Leadership Series, the Eagle Scout Silver Beaver Award, the National Distinguished Eagle Scout Award, named in Outstanding Young Men in America, and the Sagamore of the Wabash award, which is the highest award given in the State of Indiana by our Governor.

Steve Hokanson graduated from Indiana University in 1969 with a Bachelor of Science in Management and Administration. Steve is a licensed Real Estate Broker in the State of Indiana, and his designations include Counselor of Real Estate (CRE), Certified Property Manager (CPM), and Real Property Administrator (RPA).

Stephen J. Adams

Executive Vice President
sja@hokansoninc.com

“We strive to be accountable and responsible in always providing the best service to our customers.”

Stephen J. Adams graduated from Indiana University with a Bachelor of Science Degree in Management. After gaining experience from an internship at a locally-based real estate investment company, Stephen joined Hokanson Companies, Inc. in January 2000 as a licensed associate in the Leasing and Brokerage Division. Specializing in office, medical and industrial sales, and leasing, Stephen continues to build his professional portfolio while working on investment transactions, development, and consulting, as well as various other real estate projects.

Throughout his eighteen years of experience in commercial real estate transactions Stephen has developed business relationships with Nationwide Life Insurance Company, Healthcare Realty, The Sanders Trust, Sun Life Financial, Vectren Corporation, Energy Systems Group, Fifth Third Bank, Bradford Schools, Inc., DuPont Commercial Flooring, Lake City Bank, Firestone Building Products, National Bank of Indianapolis, Lacy Diversified Industries, Barnes & Thornburg, Otolaryngology Associates, Charles Schwab, First Financial Bank, Old National Bank, and the Indiana Bar Foundation, among others.

Continuing the company’s history as the premier medical real estate provider in Indiana, Stephen has developed relationships with Indiana University Health, American Health Network, Urology of Indiana, Otolaryngology Associates, Midwest Fertility Group, OrthoIndy and Indiana Nephrology, and Internal Medicines. He has also completed transactions for the following list of medical clients: CENTA, Indianapolis Gastroenterology and Hepatology, Balance Point, Whisper Hearing Centers, Anesthesia Consultants of Indiana, Methodist Sports Medicine, Rehabilitation Hospital of Indiana, Advanced Physical Therapy, Wishard Health, and Suburban Health Organization, among others.

Stephen devotes his time to various organizations including Fairbanks Indiana, Noble of Indiana, Penrod Arts Society, Youthlinks Indiana, the Hoosier Oncology Group, Junior Achievement, and the Governor’s Awards for Tomorrow’s Leaders. He is also a member of the Stanley K. Lacy Executive Leadership Series, Class XXXVII.

Boyd R. Zoccola

Chief Development Officer
brz@hokansoninc.com

“Your ideas become reality through our combined efforts.”

Boyd R. Zoccola serves as Chief Development Officer of Hokanson Companies Inc. With over 25 years of experience, he focuses his expertise on development of office and medical space, and corporate consulting. Boyd has been actively involved in the development of nearly $600 million worth of real estate, including client partners like IU Health, Springleaf Financial, Vectren Corporation, and Old National Bank.

Boyd’s industry involvement with The Building Owners and Managers Association (BOMA) is extensive beginning in 1994. He served as Chair and Chief Elected Officer of BOMA International, and has also served on the Executive, Finance, Medical, and Healthcare Facilities Committees. He also served and chaired numerous task forces along with being a panelist and/or speaker. Boyd’s BOMA Indianapolis experience includes positions as President, Vice President, Treasurer, Secretary, and multiple committee chairs. In addition, Boyd served as a Board Member of the Real Estate Round Table from 2011-2012.

Boyd graduated from Indiana University with a BA in Biology and is a graduate of the Stanley K. Lacy Leadership Series. Boyd has served the community through his involvement with Horizon House, Girls Inc., and the IYHA. He is a member of Second Presbyterian Church, Sigma Chi Alumni Association, Meridian Hills Country Club, and is an Indiana Real Estate Principal Broker.

Christopher M. Horsley

President and Chief Operating Officer
cmh@hokansoninc.com

“Working hard to make a difference to earn your business.”

Chris Horsley joined Hokanson Companies, Inc. in 1997 while completing his degree in Civil Engineering at Purdue University. Chris began his employment at Hokanson Companies in the construction area and in 2000 added Property Management to his responsibilities. Now as President and Chief Operating Officer, he focuses his efforts on construction, development, and property/facility management. Chris oversees a team of property and construction managers to provide management services to approximately 5M square feet in a 7-state geographical service area. Chris also works closely with multiple financial institutions to meet their bank branch real estate needs which includes a 140-branch system across a 3-state geographical area.

Chris graduated from Purdue University in 1999 with a Bachelor of Science in Civil Engineering. He holds a Professional Indiana State License for an Engineer in Training (EIT) and an Indiana Real Estate Broker and is a Certified Commercial Investment Member (CCIM). Chis is also involved with The Building Owners and Managers Association (BOMA) and is currently serving on the International Executive Committee and is the Secretary/Treasurer for BOMA Indianapolis.

Chris enjoys spending time, working in the business, being outside, riding motorcycles, exercising, playing golf, and being with his family.

Tony R. Townsley

Chief Financial Officer, CPA
trt@hokansoninc.com

“A great company has great people who are passionate about what they do! I am proud to be a part of the Hokanson Team, where we demonstrate that passion every day in helping our customers solve their Real Estate challenges.”

Tony Townsley serves as Chief Financial Officer of Hokanson Companies, Inc. Tony began with HCI in 2001, bringing with him 25 years of accounting and operations management experience including four years with Arthur Anderson. This vast knowledge has contributed to his success overseeing the corporate financial reporting, cash management, budget coordination, and year-end audit and tax responsibilities at Hokanson.

Tony graduated from Indiana University in 1985 with a Bachelor of Science degree in Accounting. He is a Certified Public Accountant, and was appointed by the Governor to serve on the Governor’s Council of Impaired and Dangerous Driving. Tony also served on the Wine and Spirit Wholesalers’ Board of Directors. Currently, he’s involved with the Merciful Help Center, and is an active member of Our Lady of Mt. Carmel Catholic Church.

Tony enjoys spending time outdoors with his family, camping, fishing, biking, and reading. Those same family values led him in publishing a children’s book titled “Three Cups”, which teaches children how to save, spend, and be charitable with their money. There are more than 50,000 copies of the book in distribution.