While the possibility of making a lot of money exists, unless you have a lot of cash to invest buying distressed commercial real estate debt is a serious gamble. What most people do not understand is they are buying the debt, not actually the real estate. In order to gain control over the real estate, it must go through foreclosure, which can take a lot of time. Unless you are prepared to have a large amount of your capital tied up, you would be better to avoid this type of investment.
Banks have been in the habit of extending the loan when it comes to commercial real estate. They do not want to have to foreclose as this would mean the only way to get rid of it is to sell it at the current market value. They would take a huge loss. By extending the loan, they ensure they will get the money they put out for the property. As long as the payments are being met. Companies that buy the debt from the bank have the same problem. If they cannot sell the property for more than the price they paid in a short period of time, they may end up waiting until the economy regroups.
If you are considering getting into commercial real estate this way you need to be very careful in what you are buying. Most of these properties have not been maintained. The longer the loan has been in default, the worse off the property is. You may have to invest considerable more money into a building before you can even begin to think about selling it. If the property has been empty for any length of time, you can be sure it has been vandalized. In this case, you will need to make repairs and provide some type of security immediately.
Think seriously before you decide to buy a commercial debt. Do your homework on the real estate market in the area, talk to a few different realtors. Most importantly, be sure you are not going to be needing that money any time in the near future.