Real estate investors have cash, but also caution

Mike Moran
Business Times

Dale Beede
Dale Beede

“There are a whole lot of folks with a whole lot of cash, but they’re waiting for the market to bottom out.”

And that sums up the potential for real estate investment in Mesa County, according to Dale Beede, a commercial real estate agent for Coldwell Banker Prime Properties in Grand Junction.

Such observations provide both hope and frustration to those in the real estate business. Some potential buyers reportedly have enough resources on hand to invest heavily in real estate. But the lessons learned from the real estate bubble that burst over the past three years have those same investors proceeding cautiously, waiting for the lowest prices they can get.

Not everyone is waiting, however. Some people who invest for the long-haul might figure prices are nearly as low as they’re going to get, and that sitting on a property for a couple of decades might be a wise gamble.

“I have a group from the East Coast who are buying (in Mesa County) and plan to keep the properties for 10 to 20 years,” Beede said.

As is the case with many long-term real estate agents in Mesa County, Beede has seen the ups and downs of the local market — from the boom days of the late 1970s to the oil shale bust of the 1980s, to the recovery of the ‘90s and beyond and to the Great Recession that hit the Grand Valley in earnest in the first quarter of last year.

When looking at a recession in the rear view mirror, people sometimes speculate they would have been wise to buy during the downturn.

Such is the case when people in the Grand Valley see how others bought properties in the mid-1980s and realized a handsome profit 20 years later.

With industrial land going for $1 a square foot ($43,500 per acre) and median home prices dropping under the $190,000 mark this year, prices can indeed look attractive these days.

But for people who don’t have access to cash, the opportunity to buy a low-cost property can be meaningless. Local banks generally say federal regulators put the clamps on them when it comes to loaning to people who lack a large down payment, solid credit rating or proof of substantial income.

“We’re not seeing a lot of loans,” Beede said.

Businesses in the process of paying off loans face another sticky situation — some of those commercial loans are being called by banks that worry the businesses won’t be around long enough to pay the debt.

In a downturn, debt becomes a double-edged sword, Beede said. An investment in property or a business expansion might have looked like a wise investment just 36 months ago. Now, businesses that have paid off debt or delayed expansion are sitting in the better position.

To make matters more unsettling, many recall last year’s predictions of a wave of commercial foreclosures that was to flood the nation.

Mass closures of shopping malls and other commercial enterprises haven’t been commonplace. But Beede joins others in predicting that a commercial foreclosure wave is coming. Even if it doesn’t happen, there’s already plenty of available office and retail space in the valley. An economic downturn can simply force some businesses to go out of business, leaving openings for new ventures.

Such openings give Beede reason to be optimistic during down times. “It’s an exciting time to be a real estate investor,” he said. “We still look at it as being a good investment.”