So as established in a previous post, we still have a large inventory of commercial real estate, thousands of distressed commercial properties available for investment at prices lower than we have seen in years here in Arizona. What is a real estate investor to do, you may say, you’re not familiar or comfortable investing in commercial real estate because it’s different than houses.
Yes there are some differences and you may need to get a different team member or so to help you, but there are some similarities too.
For example like rental housing, the Internal Revenue Service allows investors to deduct operational expenses from gross income to arrive at taxable income. Also like rental housing the IRS allows the owner to deduct a “paper amount” for depreciation of the value of the property, now the “class life” is different for commercial properties than residential real but, your same tax adviser will know how to handle that, if they don’t then it’s time to change tax advisers anyway.
The 3 most important words in real estate: location, location and location, still ring true, but for different reason, this area will require a team member that understands commercial real estate.
If you have an opportunity to purchase property on one of the corners of a busy intersection (great location) for less money than was paid for the other three, is that a good opportunity? I would say more information is needed, just because it is a great location doesn’t alone make it a great opportunity for you. What is the Zoning and allowed Use? If you intended to put in a doughnut shop and the property is on the PM side, that would make it less valuable to you wouldn’t it? You get my point the location is the same intersection, but more information and the right information is needed to make a decision.
Yes investing in commercial real estate is different than buying houses, you need to decide if the opportunities are worth you making the extra effort.
Not to worry, there are team members with resources to help and opportunities in commercial real estate investing if you so choose.
This information is for informational purpose and not intended to be investment advise, and should be explained to you in detail. You should always feel free to consult an attorney and/or tax adviser to obtain further information you deem necessary. I want you to be prepared.