Switching gears, let’s talk about financing; never could you have poor credit, no income verification and no down payment and get a commercial real estate loan. Almost always, an investor would need a minimum of 25% down (many times up to 50% down), the buyer must have good credit and the property would need to not only cover the mortgage, but usually the mortgage plus 25% (this would make it a 1.25% debt coverage ratio, which is standard in the industry). All that being said, it almost goes without saying that there are far fewer foreclosures in the commercial market. However, speculative properties, business bankruptcies and lack of demand have created a glut of properties currently available. Even with a good down payment, good credit and a good financial statement, a vacant 50,000 square foot office building will bring down most investors in a short period of time. In the City of Ontario alone, there are 50,000,000 square feet of vacant industrial space. That, coupled with lender’s reluctance to lend on even well-performing properties, have taken a toll in the commercial market. Keep in mind, Wall Street, the major source of large, commercial loans, is, for all intents, out of the lending business. There is no “secondary market” for commercial loans, such as Fannie and Freddie in the residential market. Therefore, each lender takes their own risk and everyone is risk averse. The 75% LTV loans that I mentioned earlier are now 60% loans, if available at all.

Now the good news! (If not for the fact I am writing this sitting in a cabana in Hawaii, that would have depressed even me). Before I let you in on the up side, let me show you my perspective: I have been in the real estate business for 31 years, have been through three recessions, one depression (during which time I almost went completely broke and moved my family into an apartment and drove a peeling mini-van in lieu of my Mercedes Benz, which I was forced to sell) and other various economic upheavals. I can say, straight faced, that, without a doubt, this is an unprecedented time in history to take advantage of a great real estate market!

Since I specialize in “income property” I am concerned with revenues generated by the real estate. Never before has residential real estate been a “cash-flow” venture. In other words, who puts 20% down and expects a 12-18% cash-on-cash return on their investment? That’s a good return in the commercial market and unheard of in the multi-family investment market, yet I have found it to be commonplace in the single-family rental market! Where do you think Jim Martindale is putting his money...? Residential real estate! Thanks to our $1.5 trillion (and growing) bail out there are fantastic deals to be made with financing readily available, and cheap. High rental rates, low prices and low interest rates. I have never seen such a confluence of positive factors in my business life! Most of you are making a living extolling the virtues of home ownership. Yet, how many of you are taking your own advice and investing in your future? You are in the best position to take advantage of this stellar market, because you are on the front lines. Don’t let fear get the best of you. Warren Buffett, the second richest man in the U.S., said, “I sell on greed and buy on fear.” One might say, “But Jim, Warren Buffett just lost over $1 billion in Ford, alone.” To which I reply, “He had the billion to lose.”

Most people have the courage to buy whatever it is they buy after the market has become highly inflated and wonder why they don’t succeed. Since when has “mob mentality” been right? Be like Wayne Gretzky, the greatest player in the NHL. He succeeded not because he knew where the puck was; everyone with eyes knew that. Instead, Gretzky knew where the puck was going and placed himself in an appropriate position to take advantage. Have you been in the business long enough to know where “the puck is going”? Do you have the guts to go there? If not, give me a call. Better yet, call me on the fantastic listing you’re passing up buying because you’re too afraid. I’ll buy it and you’ll get 3%. That’s not half bad.

- Jim Martindale is a Past President and REALTOR® member of CVAR.  He is also the Broker/Owner of Martindale Commercial Real Estate located at 216 N. Glendora Avenue Ste. 200 Glendora, CA 91741.