COMMERCIAL REAL ESTATE OUTLOOK
by Annette Cooper
If there’s a silver lining in this cloud of confusion that has absorbed our collective attention; it’s that all of us have been forced to take a good hard look at how we invest and hold our money. Such scrutiny may reveal opportunities that were never before considered, or maybe didn’t exist in the past.
“Will the capital gains tax be raised?” Currently capital gain tax rates are at an historic low, hovering at 15% with the Feds. This may or may not change as the administration takes aim at reducing the record deficit. Still this may be a good time to sell and reposition your equity. Fortunately, the 1031 Tax Deferred Exchange Option remains a reliable and secure vehicle for building wealth. Now is a good time to evaluate the income to appreciation ratio in the property you own and determine how your property’s cash flow is actually performing for you. If you’ve owned your property for an extended period of time, you may discover that your property’s appreciation is eclipsing the cash flow. Now may be time to liquidate that asset and take advantage of the historically low prices that exist in the marketplace. Seek and ye shall find.
Forbes Magazine conducts an annual survey that evaluates the Best 200 Places to live and do business in the country. Now may be a time to consider finding income property in one of those other areas for diversification, stability and growth. A legitimate strategy to consider when you decide to invest out of the area is an NNN Leased Investment. It is a reasonable hedge for securing cash flow and still allows for the tax and appreciation benefits of owning real estate. NNN Leased Investments obligate the tenant to pay all the expenses associated with owning that property (taxes, insurance and common area maintenance). They are sometimes known as “coupon clippers” because they require minimal management and can be comfortably owned from a far.
Other investment real estate products worth considering are mobile home parks, self storage facilities and ground leases. All have income in place and typically require less intensive management then multi-tenant investments such as apartments, retail and office complexes.
Ultimately, the thing to remember is that real estate will not evaporate. It is remains a tangible commodity and will not disappear in a Wall Street shell game. It has the potential to offer prudent leverage and remains the most prevalent wealth building mechanism our financial system has to offer. Market fluctuations can be “waited out” and the risk to reward potential is substantial, yet secure. 90% of self-made wealth in this country has been generated through real estate investments held over time. It is impossible to perfectly time the market, but now may be the time to do some inquiry and take advantage of new opportunities.
Copyright: Annette Cooper