The key effects of a residential slow down outlined in an article by P. Chapman in the NREI Newsline this week are these:
If the residential boom is ending (in some ares of US) the most affected segments of commercial markets will be these...
RETAIL Industry may experience slower growth;
REIT's with large Retail Center Holdings may lose some value;
MULTIFAMILY could grow faster, especially rent and occupancies;
OFFICE may have negative ripple down effect;
INDUSTRIAL may have negative ripple down effect;
The good news is that there are many areas of US that most likely will NOT experience negative effects of a housing slowdown. This primarily because those areas (south, midwest, etc) have not over built residential and have not experienced the high run up in home prices in last two years. Identify commercial real estate investments in these areas.
Investors always consider location in making an investment property decision. This is (almost) a given. However, in buying investment properties of $1 to $5 million, some exchange buyers let the income stream and/or price become more important for various investment goal reasons.
Giving educated projections about the site, location and area can make the diffenence in a "good" investment and a "great" one over the hold period.
View the site or location you are buying from the standpoint of what you will sell or lease if for if the worst case (tenant goes away) happens durning the lease term. Easy to lease for a different commercial use? Corner with multiple ingress-egress? Front outparcel with visibility? Will the lot or site alone increase in value over the hold? Near-by neighbors long term, declining, growing business types?
A carefully chosen site location may be the one thing that makes the investment property work 10 years out...even if the lease income stream does not prove to be all we had hoped it might be. The disposal value of the property location may make the investment a "home run" when it comes time to sell or trade.
Understanding the difference between market value and sale price can lead to a tax reduction.
The basis for a property tax appeal rests on an analysis of the property's value for real estate tax purposes, says Vickie L. Norman, Esquire, tax attorney and member of the American Property Tax Counsel. The valuation analysis can be based on numerous comparisons, the most important of which is the ocmparison of market price to sale price. The analysis also must include the property's ability to generate revenue.
This valuation analysis provides the first clue regarding whether the assessor's valuation of a property is equitable. Market value is most often defined as the probable price a willing buyer would pay a willing seller in the open market. It implies that the property has been on the market for a reasonable lenght of time, and that both buyer and seller know the present and potential use of the property.
The sale price at which a property sells does not necessarily reflect market value for property tax purposes. For example, a developer probably pays more than market value for parcels needed for a site being assembled to build a shopping center. On the other hand, a seller needing cash in a hurry probably sells at below market price.
Also, in most cases the sale price includes more than just the tangible real estate. For more on how to avoid high property taxes, go to the APTC site at www.aptcnet.com.
Reducing taxes on real estate investment property is a subject in which most investors have a keen interest.
Even if a tax return already includes a depreciation schedule, it probably does not correctly segment all areas (of improvements) in your investment property that can reduce taxable income.
For more information see the poconner.com appraiser web site or call your own CPA. The taxes you save annually may be substantial.
Some public Real Estate Investment Trusts are going private according to NREI news service. So far this year, five public REIT's were sold to private investors up from three last year. Investors are pouring money into public and private real estate firms. This has driven share prices up, and that has led many alalysts to downgrade some of the listed REIT's, which they say have become too pricy. With share prices up and returns just mediocre, some REIT's have opted to go private at today's share prices.