Higher Prices

As soon as the market turns around, prices start appreciating. Although retail space is still a tenants market, less office space is available than a year ago. Demand for industrial space is strong while apartment vacancy rates have dropped to under 6%.

Limited Choices

Right now, buyers have choices. Investors simply decide if they are interested in apartment complexes, industrial warehouses, mini storage facilities, office buildings or medical offices. The commercial real estate agent gathers information on available units and discusses the pros and cons of each with the investor. However, in the future, the list may only have two or three properties on it instead of five to ten available now.

Competing Buyers

The biggest challenge to financiers who wait until the investment market is packed with other buyers is the bidding wars. When two or five buyers compete for the same property, each one offers something special. Some may have all-cash while others offer higher prices or faster closings. There is one thing everyone knows: when buyers compete, sellers win.

Smart investors are buying commercial real estate now. These financiers are in the real estate business for the long haul and are not worried about short-term market dips. Experienced property owners negotiate on each offer asking for lower prices and coveted seller concessions. Not only do these buyers have a choice of properties, they have no competition.

Travel

Businesses deduct travel expense for necessary travel. For investors, this means travel to and from properties. These can be real estate already owned or real estate under consideration. This expense can be actual cost or a mileage allowance. If investors take public transportation or a taxi from their house or office to the investment property, they deduct the cash paid out. If they use their automobiles, this expense is computed on actual operating cost or a per mile fee. When property is located a certain distance from the owner’s home, that person can claim lodging and meals. Many people buy property in other states or countries so they can write off travel, lodging and meals costs on these trips.

Depreciation

Because buildings and their components wear out, investors get credit for a certain percent of their investment every year. Either the building and everything in it is depreciated over a set number of years or the individual components are calculated separately. According to the IRS schedule, property is separated into different categories with depreciation periods of 3, 5, 7, 10, 15, 20, 25, 27.5 and 50 years. Anyway this lucrative tax deduction is calculated, property owners benefit. Not only do these lucky people collect rental income, they get a valuable depreciation deduction which reduces income and income taxes.

Businesses are given many beneficial tax breaks. These include the cost of going from one place to another and depreciating expensive real estate. People who take advantage of commercial real estate investing get these benefits.

Asking

The commercial agent consults with each party or their agents to discover what the people want, need and why. Purchasers asking for a lower price may need financing help. Sellers wanting all-cash may only think they need cash to pay off the loan on the real estate.

Listening

When gathering information, these specialists carefully listen to what is said and clarify what they heard. A buyer with only a 30% down payment needs 40% down to get financing. When asked about the price, the buyer had no problem with what the seller was asking; he just did not have the extra money he needed. The seller has an underlying mortgage with a private individual; the paperwork says this must be paid off when the property is sold.

Merging

Once the needs of both parties are clearly understood, the professional has something to work with. The experienced agent structures the deal different ways trying to find a solution to this dilemma. If the seller agrees to carry a 10% second, the lender may finance the property. The person with the private loan on the seller’s property may be very happy to continue collecting payments if she is asked.

Although this process sounds simple, it is a complex procedure. Discovering the real problem or problems takes time. Analyzing the issues and discovering solutions comes with experience and determination. If the negotiation is successful, the transaction happens. A great commercial real estate broker uses this secret weapon often.

Higher Prices

As soon as the market turns around, prices start appreciating. Although retail space is still a tenants market, less office space is available than a year ago. Demand for industrial space is strong while apartment vacancy rates have dropped to under 6%.

Limited Choices

Right now, buyers have choices. Investors simply decide if they are interested in apartment complexes, industrial warehouses, mini storage facilities, office buildings or medical offices. The commercial real estate agent gathers information on available units and discusses the pros and cons of each with the investor. However, in the future, the list may only have two or three properties on it instead of five to ten available now.

Competing Buyers

The biggest challenge to financiers who wait until the investment market is packed with other buyers is the bidding wars. When two or five buyers compete for the same property, each one offers something special. Some may have all-cash while others offer higher prices or faster closings. There is one thing everyone knows: when buyers compete, sellers win.

Smart investors are buying commercial real estate now. These financiers are in the real estate business for the long haul and are not worried about short-term market dips. Experienced property owners negotiate on each offer asking for lower prices and coveted seller concessions. Not only do these buyers have a choice of properties, they have no competition.

Attractive Prices

Not only are real estate prices lower, buyers have many properties to choose from. With office vacancies starting to decline and the industrial sector shrinking through conversion to other uses, demand will start to increase. This will drive up prices as inventory shrinks.

Business Tax Advantages

Holding investment property is a business. Because buildings wear out or become functionally obsolete, buildings and their components are depreciated over a predetermined number of years. This process gives investors lucrative tax advantages. Other expenses like maintenance, legal costs, property management fees and accounting are deductible from income. Travel costs are also expenses. Investors can live outside the city, county, state or even country and get this benefit. In fact, if the property owner lives far enough away, meals and overnight lodging are included in travel.

Des Moines, Iowa

This thriving city is the capital of the state and county seat of Polk County. According to the 2010 Census, Des Moines is the 88th largest city in the United States. Two Fortune 500 companies are headquartered here and it is a major center for insurance, financial services and publishing. Even more important, the city is fun to visit.

Smart investors pay attention to this advice from an experienced sales agent. Whether the investor lives here or somewhere else, this recommendation makes financial sense for long term projects. Now is the time to take advantage of low prices, larger inventories and tax benefits while enjoying all the profit and fun Des Moines has to offer.

Businesses in Polk County

Reviewing the number of grocery stores, super centers, convenience stores and full-service restaurants operating inside the boundaries of Polk County gives investors an idea the diversity and spending habits of the residence. There are 63 grocery stores and seven supercenters or club stores currently operating. Although there are only 8 convenience stores without gas, there are 166 convenience stores allowing quick stop shopping. The most surprising statistic is the 316 full-service restaurants.

Market Prices: Multifamily, Office, Retail and Industrial

According to the latest reports, multifamily units on the market are listed for $31,177 a unit which is an increase of 2.7% in just three months. Office buildings for sale in this county want $79.76 a square foot while statewide retail space is listed at $70.56. In Polk County, industrial property is offered at $40.79 a square foot.

Lease Rates

Most lease rates are improving. Multi-housing units saw a decrease in vacancies to just under 6% and an increase in rental rates over the past year. Office space on the market is going at $12 a square foot while retail, which is still a tenant’s market, is listed at $11.52. Industrial is asking $5.76; this is a 12.1% increase from year ago.

Investors use this data to review their projections and make adjustments. Having a commercial real estate agent with this information makes long-term planning easy. It is even more important to have up-to-date data when scheduling additional investments.

Consultation

At this meeting, clients explain what their needs are and why. A seller wanting to sell a valuable piece of development land may think that is enough information. However, the agent needs to know when the property needs to be sold and why to meet the seller’s expectations. If the seller needs the money in 90 days to buy an apartment house, price or terms need to be adjusted to meet that need. A buyer under the time restrictions of a tax-deferred property exchange has a limited period to find property and close the transaction.

Research and Options

Finding the best price to put on a 12 acre lot in a business park requires accurate sales information on comparable properties. Sellers review current sales prices and may even drive past properties to verify similarities and differences. This process reaffirms their assessment of value, gives them an idea of the value or causes them to reevaluate their decision. Selecting five or seven office buildings for an investor looking for income property takes time. Buyers have more fun.  After they review the list of different office buildings, they select two or three properties to inspect.

Now, it is time to make a decision. Sellers decide on the price and terms acceptable to them. Comparing the buildings, tenants and income potential is the first step for buyers faced with an exciting opportunity to buy income producing property. An informed commercial agent makes this process easy for everyone.

Rules of a 1031 Tax Deferred Exchange

Investors must replace the property with like property of equal or greater value. This does not mean that an office building can only be replaced with another office building; it means that investment property must be replaced with investment property. If undeveloped industrial land is sold, a medical building can be purchased. Business property selling for $475,000 must be replaced with real estate worth $475,000 or more.

Time Frames

From the day of closing, the seller has 45 days to identify replacement property and 180 days to purchase it. This time frame is much more generous than it sounds as real estate transactions take months. Experienced agents help their sellers find replacement property as soon as an offer is received and accepted. With this process, property owners have adequate time to locate, inspect and purchase new property without stress.

The 1031 tax-deferred exchange allows serious investors to capitalize on real estate transactions. As the tax from the sale is deferred to a future time, sellers decide when to pay the IRS. This allows more money for investments as these owners of the business property for sale use all of the funds received.

Financing

Lenders are finally back in commercial finance. However, these lenders have all new rules. Banks insist on proven protection and value. Strong, long-term cash flow from credit worthy tenants is a necessity today. If the project fills a local need like a new housing project in an area short on affordable housing, the project will be approved. Likewise, if an older industrial building being converted to another use and offers below market rents, the lender knows the property is viable and willing to finance the project. However, lenders may still want additional concessions or guarantees.

Taxation

Taking title, holding and disbursing investment property all have tax consequences. Although a certified public accountant is an investor’s best friend, the real estate agent provides quick and free overviews of this process. Individuals place their personal assets at risk when they take title as sole proprietors or partnerships. While using limited liability companies, corporations and trusts protects assets, these entities have other tax ramifications and consequences. Although using a 1031 tax-deferred exchange postpones taxes on profits when property is sold; certain procedures must be followed to get IRS approval.

Clients get more value from their real estate agent if the agent takes commercial real estate education classes. These real property experts learn how to get commercial financing in today’s competitive marketplace and reduce tax burdens. By using knowledgeable agents, investors discover life is easier and more lucrative.

Commercial Agent

Knowledge, experience and ability all combine in this transformation specialist. An expert who knows what buyers or tenants want and are willing to pay for locates the right property and suggests necessary changes. This real estate professional has the ability to see the investment as it is and as it could be.  By explaining the changes necessary, expected return and the  time needed, investors get the data they need.

Problem Properties

If there is a practical solution, it does not matter what the problem is. A beautiful nearly new building with limited parking may be resold to an energy conscious corporation. If the corporation demands employees use public transportation, the lack of parking will not greatly impact the office space value. Of course, neither the buyer nor the agent mentions this when the low offer is presented to the seller. Office buildings, strip malls and industrial complexes with high vacancy rates may be excellent investments if new tenants can be found. Although turning the rundown old farm on the edge of town into a fashionable housing development takes time, the money may be worth the wait.

Investors who approach commercial real estate investing with an open mind and can-do attitude are successful. These people buy problem properties at low prices, improve them and make money. The first step is to find a commercial agent with the right skills to help.