By Kevin P. Bentley, Broker, Bentley Commercial, LLC

“That which we call a rose by any other name would smell as sweet.” … Shakespeare. That may be true for Romeo and Juliet, but what’s in a name when it comes to investing in real estate?

Quite a lot actually … when investing in real estate, you need to carefully look at the different choices of entity. Things to consider are formation requirements, liability protection, and, of course, tax benefits.

Sole proprietorship is the simplest choice. There are no requirements to form and taxes are reported at the individual’s tax rate. There is no limit on personal liability or debts or claim against a business; however, sole proprietorship does not allow for additional investors or partners.

A general partnership is when two or more people carry on a business for profit. This type partnership is easy to organize, and it has one level of taxation. The profit and losses are passed through to the individual partners for federal and state tax purposes. There is no liability protection; every partner is liable for the action of partners and employees of the partnership.

A limited liability partnership (LLP) has general and limited partners. General partners control day to day operations and have full liability, while the limited partners have liability protection. This type partnership is commonly used for law firms and public accounting firms.

A limited liability company (LLC) is as the name says … it provides limited liability for individual members. Taxes, profits, and losses are handled on an individual basis. The transfer of members and interest are simple. This is a common and simple ownership for real estate transactions.

Tenancy in common (TIC) is treated like a general partnership in that you are personally liable for debt and claims that arise. Usually it takes two or more individuals or entities to create the TIC, and in the event a death occurs, the TIC is easily transferable to an estate. TIC also qualifies under the 1031 exchange rules and allows capital gains to be deferred until later.

The subchapter “S” corporation provides a liability shield and avoids double taxation that occurs in a “C” corporation. Profit and losses are passed through to shareholders. Self employment taxes are not imposed on profits but reasonable salaries must be set for partners who are employees. Passive income has some limitations and only individuals who meet certain criteria are allowed to be shareholders in any “S” corporation.

The subchapter “C” corporation may be a good choice after a business achieves sufficient growth. The “C” corporation promises liability protection to the individual shareholders. If profits remain in a “C” corporation, double taxation occurs. The state and the IRS both require certain forms to be filed.

This is a very simplistic explanation of different types of entities which may be used when investing in real estate. We at Bentley Commercial can help you find that great piece of real estate, but when it comes to taking title, we always advise investors to consult with their attorneys and accountants in order to be fully informed and to have a good understanding of legal and financial responsibilities. After all, we don’t want you to end up like Romeo and Juliet …

Kevin Bentley would like to talk with you about your real estate goals. Whether you lease, own, invest, develop, sell—with Bentley Commercial (an affiliate of CORFAC International), you will find an expert team committed to you, and your short and long-term commercial real estate success.

By Brent L. Freeman CCIM, Broker, Bentley Commercial, LLC

A real estate investment trust purchased a 46,000 square foot multi-tenant office building located in the suburbs of Greenville in 1996 for $6,174,625 or $134.23 per square foot. In 2002 the Greenville office market began a decline that peaked in 2005 with a vacancy rate of 24.1%. The REIT sold this office building for $4,020,000 in September of 2005 for a loss of $2,154,625.

An Atlanta based investment group purchased a different suburban office building in July of 2000 for $9,000,000 or $81.82 per square foot. This was a three year old 110,000 square foot office building leased to a national credit tenant for a call/service center. This group sold the office building in October of 2007 for $15,320,000 for a $6,320,000 profit not including cash flow from the property during the holding period.

What are the keys to successful real estate investment? In the first example above, the REIT bought the property at the top of the market cycle. It was forced to lease one half of the building at a time when high vacancies were putting downward pressure on rental rates. The new lease was executed at rates that were $3 to $4 per square foot lower than rental rates just two years earlier. When rental income on investment real estate is reduced there is a corresponding drop in the value of the investment. The REIT also sold the office building at the bottom of the market cycle. Understanding market forces and how they affect value is critical to the real estate investment success.

The Atlanta based investment group that had a profitable real estate investment purchased a single tenant property where the tenant had an excellent credit rating. The tenant had signed a long term lease on the building that was in force during a period when lease rates where declining and they were insulated from the declines in lease rates. They also sold the building at the top of the real estate cycle.

A good real estate broker can guide you through the pitfalls of real estate investment. A good investment real estate broker should possess excellent market knowledge and knowledge of real estate cycles and how they affect value. Look for a broker that has the CCIM designation which requires extensive coursework in real estate investment, production requirements and market analysis.

Brent Freeman holds the CCIM designation and specializes in commercial investment real estate and the office market. He has been surveying the Greenville, SC office market since 1999 and currently publishes the Bentley Commercial Greenville office market report. If you would like a copy of the report please contact him and he will be happy to send you one. Brent would like to talk with you about your investment property or office needs. Whether you lease, own, invest, develop, sell – with Bentley Commercial (an affiliate of CORFAC International), you will find and expert team committed to you and your short and long-term commercial real estate success.

By Laurens C. Nicholson CCIM, SIOR, Principal, Bentley Commercial, LLC

Imagine this … you see your physician and you are diagnosed with cancer. You need surgery. What next? Go see a generalist … or your local podiatrist? Emphatically NO! You make a plan – you go to see a specialist – the very best specialist you can find. You want THE person who has performed this surgery hundreds of times, day in and day out. You want the doctor with the most experience and the greatest knowledge possible … You want someone who is not distracted by other procedures and is totally focused on your particular need.

When it comes to your real estate investments, who are you going to trust? — Someone who says they specialize, but does a little bit of everything? Hire a specialist! Employ a broker who truly does specialize in the property type in which you are investing. Look for someone who has earned the Certified Commercial Investment Member (CCIM) designation. The CCIM designation is the Ph.D. of commercial real estate … it is the highest professional certification one can earn in the commercial investment real estate field. The CCIM curriculum consists of extensive courses encompassing hours of classroom work in financial analysis, market analysis, user decision analysis, and investment analysis.

To qualify for the final designation, the broker must submit a resume of closed transactions, which shows experience in practice … not just theory. And finally, candidates must complete comprehensive examinations … 21 hours of examinations … with, of course, a passing score. Of the licensed realtors throughout the US only .0075% hold the highly coveted and respected CCIM designation. This reflects not only on the caliber of the program, but also provides the “why” for hiring individuals who have worked hard enough to earn the CCIM designation. They are your experts in real estate — educated and knowledgeable — trained and experienced.

Laurens Nicholson holds the CCIM and SIOR designations and specializes in commercial investment real estate. In 2002, Laurens was awarded the Commercial Realtor of the Year by GGAR and in 2006 Laurens joined the faculty for the CCIM institute. Laurens is the first instructor from South Carolina in over 25 years. Laurens would like to talk with you about your investment property … give you personalized suggestions that can make your property stand out. Whether you lease, own, invest, develop, sell—with Bentley Commercial (an affiliate of Corfac International), you will find an expert team committed to you, and your short and long-term commercial real estate success.

Ava Harrington, Director of Marketing, Bentley Commercial LLC

History was made in 2008 with an extraordinary presidential election. Meanwhile, the economy took a nose dive into cesspool of uncertainty. Cutbacks, bailouts and furloughs have affected everyone in some shape or form. So, what does this have to do with marketing?

Everything. Albert Einstein once said “The definition of insanity is doing the same thing over and over again and expecting different results”.

When it comes to marketing yourself or your business, it’s imperative to look at the techniques already in place and decide what will work in this ever-changing environment.

Below are a few tips for starting the year off on the right foot when it comes to marketing:

1) Plan and Conquer. It’s not enough to just have a great idea. You must follow through with the course of action. Lay out the details, assign duties and follow-up with the team members. Set deadlines for completed projects and encourage each member with positive reinforcement to maintain an optimistic atmosphere.
2) Communication requires conversation. Email works, but often gets lost in the shuffle. Text messaging is quickly becoming an approved method of business communication, but often leaves out important details. Face time is a necessity. It allows the opportunity to read the body language of the people you are working with, to show your sincere dedication to the project and to make a visual impact.
3) Remember your neighbors. Word of mouth marketing is still one of the best forms of advertising. Be sure your friends, neighbors and family members know what you do. Don’t be afraid to ask for references and offer the same in return.
4) Try a new coat of paint. Take concepts that are already working exceptionally well and tweak them slightly to add a new spin. Giving an old idea a fresh look will save you time and money in the long run.
5) Ask the janitor. The team may consist of professionals and specialist who are experts in their field, but sometimes those experts get burned out all too quickly. Don’t be afraid to seek out new ideas from other associates within the organization. Everyone wants the company to succeed. Sometimes a fresh idea may come from the most unexpected source.

Remember, if the idea didn’t work yesterday and it isn’t working today, it probably won’t work tomorrow. Save yourself the time and effort and just try something new. Expect the unexpected in 2009, but be prepared. Plan ahead, communicate and don’t forget to ask the janitor.

Bentley Commercial, LLC specializes in your somewhere. Lease, own, invest, develop, sell—with Bentley Commercial (an affiliate of Corfac International), you will find knowledgeable real estate professionals who know how to market and stand ready…to help you meet your short and long-term success.

Andy Mitchell, Broker, Bentley Commercial LLC

Real estate owners, investors, buyers, tenants and brokers are facing challenging times as we attempt to navigate our way through the current difficult economic environment. And now, to make matters more confusing, whether you voted for Barack Obama or not, he’ll soon be in the White House to serve as the new President of the United States for the next four years. With Senator Obama’s election and gains by Democrats in the U.S. House and Senate races, the one big question on the minds of many property owners and commercial real estate brokers is, “How will this affect the commercial real estate industry as a whole?”

While there are many wavering opinions as to how the election of Barack Obama will impact the real estate industry, below are a few areas in which you can expect to see some “change”:

• Capital Gains Taxes: We currently have a 15% tax on capital gains. This is set to expire in 2010. Obama has proposed raising the capital gains rate to 20% for individuals earning $200,000 or more and couples earning $250,000 or more while eliminating capital gains for certain investments in small or startup businesses. This may bode well for those interested in 1031 tax deferred exchanges as long as the rules for these types of transactions are not altered.

• Corporate Tax Rates: Obama has indicated that he is in favor of providing a tax credit to employers that increase the number of employees in the United States; maintain a U.S. headquarters; and provide certain benefits to its employees.

• Carried Interest Compensation: Current law treats carried interest compensation as a capital gain, taxed at 15%. Some speculate that the tax plan will require the carried interest income from investment partnerships to be taxed as ordinary income rather than as a capital gain. This too is scheduled to increase from 35% to 39.6% in 2011. This will affect development and investments moving forward, as investors will not have the same financial securities in developing real estate as they have had in the past.

There are many policies that will probably see some measure of change in the next few years, but the few mentioned above are likely to provoke the most concern among folks in the commercial real estate industry because of the extreme differences they invoke from the policies and practices of previous
administrations.

While the industry tended to favor Senator John McCain prior to the election due to concerns over Obama’s proposed tax changes, many industry leaders now seem hopeful that an Obama
administration will right the wrongs of the current state of our national economy.

It is almost certain that the Obama presidency will be drastically different from the Bush years. Economic stress and other fiscal restraints may make the policy-making environment challenging
in the coming years. The political reality is that the current financial crisis will likely take precedent, hindering his ability to tackle the majority of the other areas of his agenda.

Andy Mitchell would like to talk with you about your commercial property or investing in commercial properties…give you some personalized suggestions and information that could help you in your real estate investments. Whether you lease, own, invest, develop, sell—with Bentley Commercial (an affiliate of CORFAC International), you will find an expert team committed to you, and your short and long-term commercial real estate success.

By Brent L. Freeman, CCIM, Broker, Bentley Commercial LLC

The biggest factor that determines the success or failure of a commercial real estate investment is the understanding of real estate cycles and how they affect value. According to Stephen A. Pyhrr PhD, Senior Managing Director of the American Real Estate Society, the commercial real estate market experienced a “top” in 1985. Characteristics of a market “top” are speculation, overbuilding, and over-lending that leads to overpriced real estate.

We have real estate market cycles because most investors capitalize the present economic situation into perpetuity assuming current trends will continue forever. Because of this tendency, most investors do the wrong thing at the wrong time by buying high (during the boom) and selling low (at the bottom), following the herd instinct. These characteristics result in overpriced real estate at the “top” and under-priced real estate at the “bottom.”

Phyrr’s research shows we had a “bottom” in 1991. Market “bottom” characteristics are panic, no lending, foreclosures, bank failures, and bankruptcies. In the current economic environment, we are starting to see some of these characteristics.

After we had a cycle “bottom” in 1991, we have experienced an “up” market until now. It appears the commercial real estate market has reached a peak and is now starting a down cycle. Investors that will do well will be the ones that buy commercial real estate at or near the “bottom.” Phyrr states that “the cycle goes down faster and deeper than most predict.” The key is to determine when we are at or near the “bottom”.

HOW DO YOU KNOW WHEN THE REAL ESTATE CYCLE IS AT OR NEAR THE BOTTOM?

Picking the “bottom” of the cycle is difficult since each property type i.e. retail, industrial, office, and land has its own cycle and each region has a cycle as well. Successful investors will have to be a bit contrarian and not follow the herd. Successful investors will need a real estate counselor who understands the local market and its cycles.

Investors would do well to seek out a real estate broker/counselor who knows the local market and specializes in a specific property type. Seek individuals with the CCIM or SIOR designations, both of which require a large transaction volume and educational requirements to obtain. This ensures that you have an experienced and knowledgeable broker/counselor. Pick a firm with a great deal of experience, a firm that has been through several real estate cycles like Bentley Commercial, LLC. Call us to discuss how you can take advantage of real estate cycles or if you need a broker/counselor with access to state-of-the-art market information and specialization in specific property types. If you own commercial real estate, let us develop a marketing plan that will keep your occupancies up in a “down” cycle.

Brent L. Freeman holds the CCIM designation and specializes in commercial investment real estate. He has been through several real estate cycles and would like to talk with you if you need counseling or general brokerage services. Whether you lease, own, invest, develop, or sell … with Bentley Commercial you will find an expert team committed to your success!

By Marty Flora, Principal, Bentley Commercial LLC

It has been a little difficult lately to stay positive in these times of seeming uncertainty -– but then staying positive is a choice, and we at Bentley Commercial have chosen to stay positive. After all, there is always a rainbow hidden in every rain cloud … you just can’t see it unless the sun is shining.

We’ve all had challenges lately that knock chinks in our positive armor – rising gas prices, rising food costs, and listening to the political arena … now that’s definitely a challenge. And we’ve all had to make adjustments – not only in our personal lives, but in our jobs and businesses as well. We’ve certainly had to make adjustments in the real estate industry. The news media is full of the housing and banking crises that we face. So adjusting to those kinds of conditions is an absolute necessity for our office.

My role in real estate has not been on the sales side … I am the person “behind the scenes” that makes sure all those transactions happen once they walk in the door. In that role I have had the opportunity to listen to all that is going on around me. I have attended several real estate conferences this year and listened to economists predict the future…usually speckled with some “doom and gloom.” I’ve listened to numerous discussions and debates about the economy and its impact on the real estate market. And there have been lots of different opinions about what the market conditions are exactly … an hour ago we were stable, but the next 60 minutes… well that’s another story. Not only do we not know what the future might hold, but we can’t even determine for sure what is happening today. And we don’t agree on what did happen yesterday either … are we in a recession or are we not? Your guess is as good as mine.

We’ve been talking a lot in our office about meeting all the real estate challenges of today and adjusting to the market conditions … adjusting is not the hard part, but determining how to adjust and to what … well that’s also another story. What we do know is that there is opportunity in the real estate market regardless of what the conditions might be. Now is the time to study, to educate ourselves, to look and think outside the box. We are fortunate to have in our office a visionary leader who does just that, and keeps all of us motivated and excited about the real estate market in all its many facets and conditions. He prefers to keep the sun shining so that we can all see the opportunity in every challenge. There just might be that pot of gold at the end of the rainbow just waiting for us to discover it. We just have to look for it and keep that sun shining.

Let us help you discover your “pot of gold” in meeting your real estate needs. Whether you lease, own, invest, develop, sell—with Bentley Commercial (an affiliate of CORFAC International), you will find an expert team committed to you, and your short and long-term commercial real estate success.

By Randall Bentley, CCIM, SIOR, Broker, Bentley Commercial LLC

There are a lot of new terms out there to describe my generation … baby boomers, silver collars, dinosaurs, and yes, even “old geezers”. Never thought I would reach that status, but here I am teetering on the edge of old-geezer-hood.

I prefer another term emerging in the workplace … “experienced resources.” The experts are telling us that the earliest baby boomers have just reached retirement age and that the total number of experienced people in the workforce is likely to fall even further over the next few years. Companies may experience a decline in the experienced workforce that in the past has enabled businesses to keep running for years. According to a survey recently conducted by AARP, however, most baby boomers expect to work in retirement or past retirement age. This is good news for companies who may need help and can draw from experienced resources to meet employment needs.

What does that mean to the real estate industry? We’ve recently seen an emergence of the older generation wanting to “get into” the real estate business. Real estate generally interests most people and anyone with sales experience in any industry can easily adapt to selling real estate.

As a commercial real estate broker, I like working with the younger generation and teaching them “tricks of the trade”, but as I approach the retirement age myself, I find it more and more appealing to work with the “experienced resources.” Why?

1. Generally, statistics show that the older generation has strong work ethics. They come to work early and stay late, they don’t complain much, and they do their work with enthusiasm.
2. Seniors are not trying to advance up the ladder … they’ve already “been there – done that.” Their egos don’t get in the way.
3. Seniors actually want to work. They’re ready to get out of the house, to interact with people, and do something useful.
4. The older generation is known for its dedication to doing a good job. Whatever they take on, they’re going to do it to the best of their ability … for self-satisfaction, if for no other reason.
5. And lastly, seniors can handle a lot of different situations … demanding management, annoying co-workers, complacency … they’ve seen it all and take it all in stride.

Real estate may be the perfect work scenario for the “silver collar” generation.
Although learning the real estate business can be challenging, it is rewarding as well. There’s virtually no ceiling on income and opportunities abound for real estate investment. There is also the excitement of helping people have a part in the so-called “American Dream” and being a part of making his or her dreams come to life. Honestly, it’s one of the most rewarding parts of the business. Once real estate gets in your blood, there’s no denying it … and there’s always another deal out there on the horizon. There’s nothing like the sense of satisfaction when a deal comes together. This “silver collar” knows from experience.

Randall Bentley has been serving the Greenville area as a commercial real estate broker for nearly 30 years and would love to talk with you about helping you with your real estate needs.

By Randall Bentley, CCIM, SIOR, Broker, Bentley Commercial LLC

Co-ownership of real estate (CORE) is a relatively new real estate phrase currently gaining momentum in today’s investment real estate market. A more common term is Tenancy in Common or TIC investment properties. Tenancy in common ownership has been around for hundreds of years; however, its more recent popularity has dramatically increased because of growing investor interest, increased opportunities, and most importantly perhaps, the guidelines and clarifications provided by the IRS for 1031 tax deferred exhanges.

Fractional co-ownership enables individual real estate investors, organized as co-owners, to purchase fractional interests in higher quality assets and realize the potential benefits of owning quality investment properties that a single investor may not be able to do on his own. This strategy can provide more stable, institutional quality real estate assets and income, without the headaches of hands-on management.

What are the advantages of Co-ownership opportunities?
• Lower equity requirement for higher quality investment
• Participation in property or rental cash flow income and appreciation
• Co-owners share tax and wealth preservation benefits
• Qualifies for 1031 deferred tax exchange on an individual basis
• Professional property management and asset management
• Minimization of risk due to higher quality and larger revenue volume

Are there any disadvantages of Co-ownership properties?

As with all real estate investments, there is always some risk; however, the risks with co-ownership are minimized simply because the ownership is fractional and co-owners do not bear the entire responsibility should the investment prove less productive. For instance, there is financial risk and responsibilities for a property where investors have to “pony up” extra cash when major repairs to a building are needed or when several large tenants move out and the space is not immediately re-leased.

Investors who do not take the time to study in detail or perform due diligence on the property may realize soon after the closing that the property does not perform “exactly” as was projected in those beautiful brochures and financial spreadsheets. Projections and reality are two different things.

By the way, you may want to get used to the idea of having partners you may never meet in person. A TIC property can have up to 35 investors; however, co-owners are on fee title, allowing them to sell their interests to other buyers any time within specified guidelines established by the co-ownership entity.

How can I know what is a good investment?

We at Bentley Commercial always advise investors to use a licensed real estate professional broker who has expertise in real estate investments and a deep knowledge and understanding of not only the real estate market, but development methodologies and strategies as well. Determining the profitability of an investment property, especially a higher quality more complex investment, can be extremely detailed and one must have or rely on the knowledge of professionals with expertise in market conditions as well as financial analysis.

Randall Bentley has been in the commercial real estate business for nearly 30 years and would love to talk with you about possible investment opportunities in co-ownership real estate properties.

By Andy Mitchell, Broker, Bentley Commercial LLC

I once heard someone say, “Everyone thinks they are a real estate expert … just go to any cocktail party around town and you’ll find that out.” The overwhelming majority of the talk and press about the future of real estate markets is that the economy is doomed and investing in commercial real estate is way too risky. The truth is, even in a downward economy there are still numerous opportunities for successful investments in commercial real estate, particularly in Greenville and the Upstate. In fact, real estate cycles have been a significant reason for many of the financial successes of real estate investments throughout history.

Virtually every phenomenon in life, nature, politics, and business is cyclical by nature. Real estate is no different. Sure…incomes may be down, cost of living is up, gas prices are through the roof and Americans are feeling increasingly grim about the economy and where it is headed. What is most interesting is that these patterns have persisted for years – and somehow people still continue to make money investing in property. Knowledge of cyclical behavior in commercial real estate markets provides a strategic advantage to an intelligent investor who seeks to reap the profits and returns achievable on the upside of the cycle, but avoid the losses and negative returns that occur on the downside of the market cycle.

As a commercial real estate broker in the Upstate, I counsel buyers, sellers, landlords, and tenants regarding market cycles. I help them to understand both the positives and negatives of investing in commercial real estate and how these cycles can affect them. The following are a few positive cyclical influences on returns and property values that can be experienced during a slowdown in the economy.

• Greenville is in a favorable phase of the market cycle, not to mention that this area has weathered the storm much better than the majority of the country. We are experiencing improvements in market fundamentals and upside opportunities despite a slowing national economy.
• Markets are generally self-correcting. Better risk analysis and risk management results in more rational pricing and higher cap rates.
• The potential requirement of more equity by lenders and good conservative underwriting practices will discourage overbuilding.
• The majority of the quick-flip, speculative investment opportunities are less prevalent — more rational, well underwritten, long-term investments are starting to prevail.
• Investors whose balance sheets show good liquidity may have the ability to negotiate more favorable loan terms and have less competition in the market place. In times like these, lenders are looking for investors with staying power.

Successful investors are able to see past the current economic conditions and take advantage of their knowledge of real estate market cycles. A knowledgeable commercial real estate broker can advise you about real estate market cycles and assist you in making smart decisions as you invest in real estate.

Andy Mitchell would like to talk with you about your commercial property or investing in commercial properties…give you some personalized suggestions and information that could help you understand real estate market cycles and how to use them to your advantage. Whether you lease, own, invest, develop, sell—with Bentley Commercial (an affiliate of CORFAC International), you will find an expert team committed to you, and your short and long-term commercial real estate success.