What You Need to Know About Distressed Assets

WHAT IS A DISTRESSED ASSET?

A distressed asset is an investment in real estate that is priced below the market value. This happens when the owner, manager, or operator of the property has money problems. These investments can be in the form of equity positions, partial equity interests, notes, or even senior loans. In other words, a distressed asset is a great deal that investors should take advantage of. These bargains only exist because the market for distressed assets is not perfectly competitive. When the seller is encumbered and the market is cool, it creates a mismatch between the amount of money people want to spend and what sellers are willing to sell for.

WHAT ARE SOME POTENTIAL RISKS OF ACQUIRING A DISTRESSED ASSET?

There are several risks that exist when acquiring a distressed asset. While you are taking on all of the potential profit that can be made from the asset, you are also taking on all of the risk and associated liabilities that you inherit when you acquire a distressed asset. These risks include potential trust issues with associated parties, inaccurately evaluating the value of the asset, and underestimating the liabilities that ownership of the asset includes. It is important to ask the correct questions when determining whether to acquire a distressed asset. If the risks outweigh the potential reward, then you may want to pass and seek other opportunities. 

WHAT ARE SOME IMPORTANT THINGS TO DO WHEN EVALUATING A DISTRESSED ASSET?

There are some important things that you can do when doing your due diligence in investigating a distressed asset. Some of these things include: 

• Proper asset identification – make sure that you understand exactly what is included in any sale of an asset and that you fully and correctly identify the asset.
• Understanding of geopolitical issues – If the asset that you are trying to acquire has potential issues due to current world events, then it can affect the value and viability of the distressed asset.
• Proper company investigation – If you are acquiring an asset that has a management team that is included, then make sure that the team is trustworthy and free from any criminal activity.

These are just some of the things that you can do in your due diligence investigation of a distressed asset before acquisition. It can be difficult to complete this work on your own, so hiring an experienced attorney can help you get sound answers to your questions. Make sure to speak to an attorney if you have legal questions. 

HOW AN ATTORNEY CAN HELP

An experienced attorney can help you identify and properly evaluate a distressed asset before acquiring it. Your attorney can lead an investigation of the asset, which can include an inspection of public records, and an evaluation of the asset itself to determine its profitability. There are many ways that an attorney can be beneficial in you targeting and acquiring the best distressed asset to add to your investment portfolio. If you have legal questions, then call us today at Zeineh Law so we can help!

ZEINEH LAW PROUDLY OFFERS A FREE CONSULTATION

If you are looking to acquire a distressed asset, then it is important to speak to an experienced attorney who can help advise you and work out your deal. At Zeineh Law, we are proud to offer FREE consultations to all prospective clients. If you are in the process of choosing your attorney or are looking for an honest assessment of your legal situation, then our attorneys are available to help you now. Feel free to contact us anytime at (517) 292-7000 or online. Our advice is free, and our conversations will always be protected by the attorney-client privilege. Get your transaction done right with an attorney at Zeineh Law today.