Real estate investors are looking for the bargains that motivated sellers should be offering. Some frustrated investors are asking, “Where are the real estate bargains?”

The simple answer is that the bargains are out there, if you have cash and are willing to take a few risks. Sellers are demanding shorter due diligence periods and accepting less money to get them. With shorter due diligence periods, buyers need to speculate on items that typically have longer lead times, such as zoning, economic feasibility and obtaining control of adjacent properties. In addition, the unpredictable lending market and uncertainty of interest rates makes it difficult for buyers to evaluate the ability to obtain, and the ultimate cost of, permanent financing for a project. Another challenge is the appraisal. The current economy has made property difficult to value and appraisers are erring on the side of caution and valuing properties low, which, among other things, impacts the buyer’s ability to obtain financing. Many buyers feel that the pricing on the properties does not reflect the level of risk that they would be required to take. As a result, many buyers are favoring less speculative and better performing properties, which come with a higher price tag.

Multi-family rental property is hot with investors right now. Many multi-family rental properties now have occupancy levels in excess of 95%; making investors more comfortable. As a result, investors are buying and prices are increasing, so bargains in that market are harder to find. A year or so ago, when the multi-family rental market was more speculative, the prices were much lower. Those investors with cash, willing to take risks, were able to pick up some bargains and make a nice profit. Of course, there are still under performing multi-family rental projects that can be purchased for a bargain price, but the really good deals are harder to find. As a side note, there may be development opportunities for new multi-family rental projects. Prior to the downturn, developers, responding to the demand for residential property for ownership, focused on single family homes and condominium projects. As a result, there has been a decline in new multi-family rental projects over the years. With increased demand in rentals created by the decrease in home ownership and a growing population of “empty nesters,” the need for new multi-family rental development projects should arise.

If the multi-family rental market is no longer the place for bargain shopping, what is? Some now speculate that the retail market may offer some good bargains, once again, if buyers have cash and are willing to take a risk. As many retailers are still consolidating or going out of business completely, occupancy levels in retail properties have not yet stabilized, so the properties are still speculative and prices remain deflated. For similar reasons, the office building market may also provide good opportunities. As with the multi-family market, however, these windows of opportunity may close rapidly as more investors become comfortable and start buying.

Bargain hunting in this economy is not for the faint of heart. The bargains are out there, they just require a little speculation, a lot of risk taking and, often times, cash. But remember, a bargain is not a bargain if the end results are not there or it comes with an unintended price.