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I'd find a really sharp commercial agent and sit down with them for an hour to discuss the market. Not neccessarily the top salesman, but someone that is knowledgable and has data to share.
What has the median price been doing over the last 5 years in commercial sales? What has the days on market been doing? Is the supply increasing or decreasing? Are any major businesses leaving town? What are leasing rates doing? What are businesses doing demographically? Are they moving into newer spaces or staying put? Are new spaces being built that will increase supply? How is the local economy performing? What are your other options in the market place? That will help you establish value where you reside. What's it worth to you not to have to move your facility? What does a sharp commercial agent feel your place is worth? You could offer them a fee to analyze it and be the middle man in negotiations and close the sale. I'm far from a commercial expert, but these are some things that came to mind. I'm sure Greg and the guys have other ideas. I certainly don't think the sky is falling, but I do think it's time to be patient in many areas. |
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Its probably alot of work, maybe. But could you answer these questions with info for the area you in. Not just commercial but real estate in general in your area. I'm just trying to learn for myself and learn more stuff kinda like Greg has done with this thread. The price of oil has really had an effect here on jobs and such but I have only seen the residential real estate market come down accordingly. Lots of places going under in the oil industry that were not saving money when it was going well. |
Sure, but the data really needs to be local. Your economy is driven by oil, ours is driven by tourism. We get all the retiree's due to no State tax. etc..
The median price of a single family home is up $600 in 9 months after a 52% increase over the previous 3 years. $118,000 up to $220,600 Inventory levels have nearly doubled since the median price hit it's low point in 2012. Resale inventory has stayed steady for roughly 2 years. New home builders are building everywhere. Their median price is $100,000 higher than the resale market. I've seen standing inventory from multiple builders lately and have negotiated aggressively with them for my buyers. Days on market has stayed pretty consistent. Ikea just built a new store and the T-mobile arena just opened. From what I see, many are thriving here and spending money again. People are moving here again from CA and all over the country. The census data shows that we've gained population in the last few years. Not by a large margin, however. Many that were upside down have found freedom with the rising home prices and are moving away. We are growing... Residential median lease rates have climbed $125 per month in the last 5 years. I hired a new assistant last week. I had roughly 60 applicants in 48 hours for a $15 an hour job plus bonuses. I'd have to research the rest of the questions. I'm seeing a bunch of first time buyers, some relocations, and move ups and downs now with the new found equity in the market. I think the market has some good life left in it and seems fairly stable. I'd sit down with 2-3 commercial agents and bounce some of this stuff off them if you are thinking of making a major play. |
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The market here is crazy, rental rates for residential are stupid high, and it seems resale inventory is real low and moves fast. It seems like a bad time to buy. Everyone here is building, both residential and commercial. |
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You probably know this already but I would also add that if you can swing it to own the building the tax benefits can be considerable, you have the business LLC (or however it's structured) lease it from another LLC (or similar entity), both of which are you. You'd basically just move money from one bank account to another and deduct a lot from your income taxes along the way. How the rich get richer! I wouldn't suggest you have one entity own both the business and the real property, but I'm not a lawyer and Calif is especially unique in it's laws for most of this kind of stuff so do your homework. Good luck! |
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On another note, while were talking investment stratagies, I've been interested in purchasing some investment property here in the town of Dublin where my business is based. The buildings (as builts) and land here are too large for my business, just about everything starts at 2 mill and goes up from there. I just don't have the kohones to do it, it will be about 11,000 to 12,000 a month. And while we (the business) can swing it right now, i'm preparing for a slow down( i bought the business 20 years ago in a recession and went through the 09'/'10). So, using the past for guaging the future is what i'm talking about. We are in talks right now with our former landlord about relocating some of or all our business back to that site, for a savings of 60% less per sq ft. Meanwhile, fully funding the companies pension(income tax differed), keep piling some cash into my diversified Dividend stocks, and continue to learn how to manage the growth.......thanx to this thread (Greg, yes i'm talking to you lol, thanx a BUNCH for you input!!!! Wish i would of heard it in my 20's LOL). |
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Disclaimer: This is coming from a licensed real estate agent. ha A skilled agent can give you insights that could be a big negotiating factor. I do agree that an attorney is crucial for a commercial deal, but their focus is law, not market dynamics and what should be expected in a negotiation. Bottom line, the money you pay them could be a wise investment. The attorney will ensure the deal is sound. |
Congrats Todd and Don on being debt free. Keep up the good work!
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I agree, I offer a flat fee in these situations. Some see the value, others don't.
I can tell you that I just had interaction with another attorney yesterday on residential sale. The concerns he communicated about the closing documents were elementary and showed very little expertise. The numbers were correct and the documents were valid as they were prepared. (We are an escrow state) It's a personal preference. Your level of knowledge plays greatly into that decision. For a majority, I see value as it could save you money and surprises that an attorney just doesn't have the expertise to negotiate or communicate. My interactions with Attorney's over the last 16 years has shown me that they understand law, not the market dynamics. That's exactly how it should be. I rest my case..:D |
I'm just stuck in this position where I'm not sure its worth it to purchase this building if the owners who have it in a trust will even do. The benefits for me are the landlord they have managing the property is not really doing much for them. My lease rate is pretty low. So it makes it tough to swallow the payment increase but sets me up for later. So I'm working on buying what I in to avoid moving. Plus I like the area I'm in, The building works well and is very close to 3-4 of my repeat customer.
But the commercial market around here never really took a dive like the housing market did. The housing market has doubled in the past 6 years or so. The commercial has not. I'm wondering if buying another property would be more well suited with the rental rate I have. I sold a couple of my race cars in the past year and have been stashing money away to work toward owning my shop and setting myself up for the future. Just trying to understand things. I get the vibe from realtors they want to sell me something and not so much forecast what they see coming. With the price of oil being down and unemployment being higher then normal, I'm surprised the available properties have not gone up. The rentals have. But maybe that is the sign before those unfilled rentals go up for sale. Bakersfield has always been a weird economy. When the world is falling apart things are OK. Its Agriculture and Oil that really kill us. Currently Dairy and Oil are pretty tough right now. Just trying to learn more and more. Thanks for the info. |
An example of a surprise:
The agent makes you aware of a recent code change that will stand in the way of ownership transfer and/or your financing. The seller and their council is unaware the property you wish to buy has the deficiency. You negotiate terms where the seller is responsible for any code violations. They don't realize the ramifications of the terms until they are balls deep. They are left with no choice but to bring the building up to code at their cost which could be substantial. There is purchase price, and there is terms. Both are very important. |
It looks like John Oliver found this thread... LOL... :lmao:
https://www.youtube.com/watch?v=gvZSpET11ZY Don |
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I am not against agents in any way, especially for housing, but there really is no comparison between commercial and residential agents and deals. The commercial ones I've dealt with care most about getting the deal done and protecting their own arses in the process. Most residential agents are looking out for the client first and closing the deal second and almost none of the deals are dual representation (like a lot of commercial deals). All I'm saying is do your due diligence yourself and don't rely on what a commercial agent, that has skin in the game, tells you about the market. I would do a commercial deal without an agent, but I wouldn't do one without an experienced commercial real estate lawyer.
Do a search on www.loopnet.com for similar commercial properties in your area, both for sale and lease. It's a little limited unless you pay but you can still get a pretty good sense of what's for sale and for how much in your area for free. |
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Next week's vote on Britain exiting the EU could create another nice dip (buying opportunity) in the market. One will have to be nimble as the ECB have pledged to bolster a transition (chaos). |
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If you've been in the market long enough - you come to understand there is ALWAYS SOMETHING coming along that's going to be the next big market disruptor. About the time you set yourself up for some event happening - that something goes the other way. LOL |
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How about a discussion on legal tax shelters?
We've all seen the publicity about the super wealthy having a low tax rate. The reason for that is that they tend to invest their money in vehicles where they can grow their money and not have a taxable event. There is realized and unrealized income every year. The more you pay the tax man, the higher your realized income was. I've been utilizing a SEP IRA for quite some time. Any capital invested yearly reduces your taxable income by the same amount. This allows us to keep more of what we earn, thus freeing up capital for investing. I believe the maximum contribution was $53,000 last year. You will need to pay taxes on the money when you withdraw it after age 59.5. However, your tax rate may be lower at that time and you can choose to withdraw money in leaner years, thus reducing your tax burden. If you have employees and they wish to participate, you will need to make an equal percentage contribution on their behalf. Other similar vehicles are available like a simple IRA and self employed 401k. 1031 Exchanges: A 1031 exchange is utilized when an investment property is sold, but the investor wishes to avoid capital gains. The proceeds are held by an exchange company until a like kind property is purchased. This is a snow ball strategy that could allow you to keep growing your equity position without incurring a tax bill. Converting an investment property to a primary residence: This can be done by moving into one of your investment properties for a minimum of two years. After two years as your primary residence, you can sell the property with no capital gains utilizing the 2 out of the last 5 rule. That means a single person can take up to a gain of $250,000 with no tax event, a married couple up to $500,000. My understanding is that you still must be levied the tax bill for the depreciation you deducted while the property was an investment. Charitable Contributions: I'm a believer in giving to those in need. I see it as a triple win. You get to help someone that really needs it, it feels great, and you get a tax break. What else do you guys have? :relax: |
A client of mine gave me this idea.
We use my daughter as a spokes model and pay her the maximum she can get paid with out state or federal taxes. 6k in California. She has to pay social security and some other expenses out of the check. Then put that money into in an IRA. She will just pay taxes on the growth in how ever many years until she is allowed to use it or we tell her about that. I have thought about doing the same thing for my good long term employees as a benefit. 100 bucks a week is not a huge deal but over 20 years is alot of money. |
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Genius!! If you put in into a Roth IRA (while they're still around) she wouldn't pay any tax on any of it EVER! Depreciation of rental property is one of my favorites. You get to write off an assumed decrease in value while most likely the property goes UP in value. There is some tax recaptured when you sell but still a really good deal. Also, not really a tax break but if you buy a rental property with a CAP rate that's higher than the interest rate on the money you borrow to buy it with you are making the split between the two rates on the BORROWED money! IOTW, 4% loan on a 5% CAP rate rental property nets you a 1% return on the bank's money. That's how they make money! |
Good discussion you guys. The only problem with the Roth for the kids, I believe the age of withdraw, there is a pre penalty for that. An IRA (SEP?) would be the best for the kids, you can also give them limited payroll and use that for the education later, it's what we tried to do, (didn't work out in our case, we got bad advice vs a 529). Plus business was small and didn't net much then.
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A ROTH IRA is probably the greatest gift the government could have ever given a taxpayer. No tax due on the growth of your money - ever. Tax free is tax free. That's a huge benefit right there! |
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In a surprising turn of events, looks like Britain will be leaving the EU. Should make for some ugly red numbers on Friday.
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Yeah, this is going to get weird!
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I guess we will see what actually does happen to the market. I was planning on adding to a holding or picking up a new one today. I'll take my time and see what happens but I hope what I was going to buy goes on sale.:popcorn2:
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I'd like to think the Brits for triggering a sale. Thanks everyone! I just picked up a couple good deals.
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Interesting to watch the market, that's for sure.
Funny how the markets falling, except my MO is climbing. 2% up today. People are freaked out and rushing to buy their Cigs and Booze. heheh |
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It will be interesting. Europe is all screwed up right now. This is going to cause a domino effect. Portugal, and Spain may be next. Not sure about Greece, but they were in trouble till they got bailed out. I'm in for the long term so if it keeps going it just creates a better buying opportunity. |
Sorry if this has been asked before but anyone here day trading? If so any resources for educating oneself that you recommend ? 3 years to an early retirement and I hope to pick up 2% here and there to pay for vacations and car parts
Paper trading sites maybe ... Plan on spending 1 to 3 years learning before jumping in .... |
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Don |
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I didn't think I could only discuss the same exact investing ideas |
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And buying FaceBooky was brilliant --- and good for you! There are many stocks that "should" be owned... But whenever I wrote here - I tried to drill down on beginners and basics #1. I've always said - that if you can stomach owning stuff like this - then you should. NOW.... I used to day trade. The ONLY THING that saved me from losing 2 or 3 million that I had in that day trading account - was that I paid cash for a house out of that account. BAM! The market sunk like a rock....... buying the house had me OUT of the market for months while we remodeled etc. In the meantime the market tanked. I used to buy $500K of MSFT and $500K of DELL and $500K of INTC in the morning... go golf - come home and sell them up .50 a share.... but this was 1997 / 98 / 99.... and a guy couldn't loose..... until he did. Most every one of my friends from that period are STILL working. |
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There is no shortcut to prosperity for the majority. It's called hard work and perseverance. Sorry... :lol:
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Cheers to that Todd. A little smarts and luck doesn't hurt though (although my smarts reciprocate and luck has never been a part of my diet)......I tell my co-workers, if you work hard and fail at your task, its not a failure, its a learning experience.....
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I don't want to dirty up this wonderful thread with BS so let's forget I asked obviously people are not interested in the subject |
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