I AM STARTING A BLOG ON MY WEBSITE THAT HOPEFULLY WILL BE ON INTEREST TO MY FRIENDS AND CLIENTS. I WILL DISCUSS ITEMS FOR HOUSES AND COMMERCIAL PROPERTIES. HERE GOES MY FIRST BLOG....
I HAD A CALLER THE OTHER DAY ASK ME A GOOD QUESTION. I HAVE AN ACRE COMMERCIAL SITE. I WISH TO IMPROVE THIS SITE FOR INCOME FOR MY RETIREMENT. WHAT WOULD BE THE BEST IMNPROVEMENT AT THIS TIME?
THIS IS A VERY GENERAL QUESTION THAT IS NOT EASILY ANSWERED. YOU HAVE TO KNOW MANY ITEMS SUCH AS THE LOCATION, ZONING USES, MAKE UP OF THE NEIGHBORHOOD SUCH AS WHAT ARE THE SURROUNDING PROPERTIES, CASH TO INVEST VERSES AMOUNT TO BE FINANCED, REQUIRED RETURN ON THE INVESTMENT, TERM OF THE INVESTMENT, MANAGEMENT OF PROPERTY, ETC. AS ONE CAN SEE WE ARE ASKING ALOT OF QUESTIONS DUE TO THIS BEING A LONG TERM INVESTMENT.
THE ANSWERS TO HIS QUESTIONS WERE LIKE THIS:
COMMERCIAL OFFICE, MOM AND POP RETAIL USES, WITH OFFICES, LIGHT INDUSTRIAL, MULTIFAMILY SURROUNDING THE SITE. THE AREA IS A LOWER TIER COMMERCIAL DESIREABLILTY. COMMERCIAL VACANCIES ARE A BIT HIGH 15-20% AT THIS TIME AND MANY NEW COMMERCIAL BUILDINGS ARE UNDER CONSTRUCTION AT THIS TIME. CURRENT RENTAL RATES ARE AROUND $12 PER SQ. FT. THE AREA HAS A LIMITED COMMERCIAL FUTURE.
I TOLD THE CALLER THAT A POSSIBLE CHANGE IN ZONING IS LIKELY DUE TO THE NUMEROUS MULTIFAMILY UNITS IN THE IMMEDIATE AREA. I WOULD CHANGE THE ZONING AND BUILD THREE DUPLEXES. THE COST TO BUILD IF HE CONTRACTS AND SUBS OUT WOULD BE APPROXIMATELY $135,000. DUE TO THE "GO ZONE" DESIGNATION OF OUR AREA AND THE STATE INCENTIVES FOR AFFORDABALE HOUSE WHICH ACTUALLY GUARANTEES 5 YEARS RENT, INVESTORS ALL OVER THE USA IS COMING TO OUR AREA FOR THE TAX INCENTIVES WITH GUARANTEED RENT. THIS IS NOT AVAILABLE NO WHERE ELSE IN THE NATION OTHER THAN THE KATRINA AFFECTED AREAS.
HE COULD SELL THE UNITS FOR $250,000 - $275,000 EACH. HE COULD THEN PERFORM A TAX DEFERREED 1031 EXCHANGE ON THE PROFITS AND TURN THIS ONE SITE INTO MANY OTHER PROPERTIES. THIS $300,000 CAST CANE BE SPREAD AMONG MANY PROPERTIES AND GROW THE INVESTMENT MANY TIMES.
AS ONE CAN SEE MANY ASPECTS HAVE TO BE CONSIDERED WHEN THINKING ABOUT LONG TERM INVESTMENTS. ALSO A GOOD ACCOUNTANT OR TAX ATTORNEY IS NECESARY IN MAKING THESE INVESTMENTS. BEFORE YOU START ANY PLAN LOOK AT ALL OF THE TAX PROBLEMS AS THIS CAN KILL ANY INVESTMENT
LET ME KNOW ABOUT OTHER INVESTMENT VEHICLES AS I AM SURE ANY ONE READING THIS BLOG WOULD BE INTERESTED....
UNTIL NEXT TIME...............DAVID