Tag: #creinvestor

The Benefits of Investing in Office Buildings

4 Shackleford Plaza

By Bill Puddephatt, CCIM

 

Investing in the CRE-Office sector can offer an excellent opportunity to diversify one’s investment portfolio. A CRE office property is a hard, tangible asset which has historically performed well over time. When the opportunity presents itself and if the time is right for you, it is wise to engage the services of an experienced CRE agent who can help evaluate and develop an investment strategy that is suited specifically for your needs and goals. It is also advisable to engage your CPA and attorney for their expertise at some point in time as well.

There are two types of investors: owner/users who intend to occupy the purchased property and those who strategically invest for the income stream and future appreciation value.

OWNERS/USERS

If you are an owner/user, you have better control over occupancy costs as you can manage levelized mortgage loan payments and have more control over operating costs such as real estate taxes, building insurance costs, property management fees, and grounds and building maintenance expenses. This provides an advantage tenants cannot have as they are often subject to annual rent increases, escalating operating costs, and a fair rate of return added for the landlord.

INCOME-GENERATING INVESTORS

Others chose to invest in CRE office property assets as an alternative way to diversify their portfolio while at the same time building a steady reliable cash flow. This type of investment also provides tax-favored treatment such as depreciation and capital gains treatment when you sell. You may also defer your gains via a 1031 tax deferred exchange by rolling your gains into a like-kind property when you sell. The 1031 tax deferred exchange has specific rules which one’s CPA can assist in analyzing for you. Read more about 1031 Exchanges by clicking here.

Both scenarios are considered excellent diversification strategies that may allow investors to achieve an attractive rate of return that can continue to grow over time, as well as the opportunity to sell and realize a gain resulting in a more favorable capital gains tax rate treatment than that of an ordinary income tax rate.  And one doesn’t need to start with a large investment. You may decide to invest as a sole owner of a small property or as a partner/member of a larger entity. The latter provides the advantage of spreading out your risks, as a larger property likely has more tenants, which means if a tenant vacates a space, it is less impactful than losing a tenant in a smaller building with a single or very few tenants.

And last but certainly not least, investing in the CRE office sector provides another incalculable benefit: the pride of ownership!

As with any investment opportunity, risks are involved. This is why it is important to work with a professional commercial real estate broker who understands the market and can help you identify and carefully evaluate any potential investment opportunity to ensure that it aligns with your goals and risk tolerance. With the right approach, investing in office buildings can be a great way to build long-term wealth and generate passive income.

 

Bill Puddephatt, CCIM

Bill Puddephatt, CCIM

Bill Puddephatt, a distinguished veteran of the Central Arkansas banking industry, made a seamless transition into the real estate brokerage field with Kelley Commercial Partners. With a remarkable career that included originating over $1 billion in loans without a single loss, Bill’s expertise in financing encompasses a wide range of real estate ventures, from office buildings to multi-family projects, hotels to subdivision developments. Renowned as a trusted advisor, he offers clients tailored solutions in the ever-changing realm of real estate.

Kelley Commercial Partners has an award-winning team of real estate professionals with the experience and knowledge to ensure you maximize your potential and reach your financial goals. Let us help you create a clear plan and provide the guidance you need to confidently move forward. Contact us today or click the links below to learn about current office property investment opportunities in Central Arkansas.

Office Building Investment Opportunities

Tenant Estoppel Certificates

Are you a tenant? A landlord thinking about selling? Or an investor looking to buy a leased property? If you have answered “yes” to any of these questions, it is important that you understand what a tenant estoppel certificate is and the benefits and protections it offers.

What is a tenant estoppel certificate?

A tenant estoppel certificate is a legally binding document signed by a tenant verifying the current status and terms of a lease and specifying any modifications to the original agreement, defaults by the landlord, or other issues relating to the lease. Typically, an estoppel certificate is requested by the landlord as part of the due diligence process before closing on the sale of a property. This statement of facts regarding the lease and the premises estops either party from making a claim that contradicts those facts post transaction.

Tenant Estoppel Certificates Include

If you lease, own, or want to purchase a tenant-occupied property, it’s important to understand how a Tenant Estoppel Certificate can protect you.

Most commercial real estate lease agreements include a provision requiring a tenant to complete an estoppel certificate within a specified amount of time after receiving the Landlord’s request. However, only a landlord wishing to sell or refinance the property would request the estoppel. If a lease does not have a provision requiring a tenant to complete an estoppel certificate, it is in the best interest of the tenant to carefully review and complete the estoppel certificate to verify all pertinent lease information.

Why sign a tenant estoppel certificate?

From the tenant’s perspective, an estoppel certificate informs and certifies to the purchaser of the property (i.e., the new landlord under the lease) and, in the event of financing, the lender of any existing issues they will need to address after closing. For lenders and purchasers, the estoppel certificate verifies information presented by the landlord regarding the tenant, the premises, and certain material terms of the lease, which helps prevent any costly surprises after closing.

As a full-service commercial real estate firm, Kelley Commercial Partners provides landlord and tenant representation. And no matter which side we represent, we are committed to successfully guiding you through the process from the beginning through closing. For all your commercial real estate needs, let us be your partner to success.

1031 Exchanges help defer certain tax liabilities

Brokerage, property management, development management, consulting

For all of your commercial real estate questions, ask a professional at Kelley Commercial Partners

A 1031 exchange, also known as a tax-deferred exchange, gets its name from the Internal Revenue Code 1031. Essentially, this rule in the tax code allows investors to defer certain tax liabilities they would otherwise incur after making a profit from a real estate investment. This can be an incredibly effective tool for investors who find themselves in a situation in which they would like to sell a real estate holding, but do not want to incur the tax burdens such a transaction would create.

In order to take advantage of the 1031 exchange rule, you must replace the property you are selling (the relinquished property) by purchasing another property (the replacement property) with one of equal or greater value and similar in kind and use. For example, if you are relinquishing a rental property for $100,000, you must replace it with another rental property with one valued at $100,000 or more. (You may also have the option to buy several rental properties, so long as the sum total of their value is $100,000 or more). So, unfortunately, you cannot relinquish a rental property and replace it with a vacation home because those two properties would not be alike in kind and use.

In addition to these restrictions, there is a set time frame in which all of these transactions must occur. Once the relinquished property has closed, investors have 45 days to identify the replacement property and 180 days to close that transaction.

Finding buyers for the properties you wish to relinquish, while at the same time attempting to identify equitable exchange properties can be challenging, especially considering the time restrictions. Proper attention must be paid to the details of how 1031 exchanges work and how using them might affect your long-term plans. This is why it is so important to find an experienced CRE professional you can trust to help you with the due diligence commercial real estate transactions require.

If you have any questions regarding a tax-deferred exchange or any other commercial real estate issue, Kelley Commercial Partners brokers and associates are here to provide the answers and support you need to make successful decisions.