B2B Blog

Taking investment decision in real estate is usually a difficult one, especially when it comes to choose between residential property and Commercial Property, Dallas. For someone who is new to investing in real estate, the decision is all the more difficult. It is usually perceived that investing in commercial real estate is for big investors and businessmen.

We take a look at some of the advantages and disadvantages of investing in commercial real estate:

Heavy Investment

There is an involvement of a heavy amount in case of Commercial Property, Dallas than in case of residential property. One must be prepared to invest a large amount after looking at his/her other financial needs and commitment.

Costlier Loans

The loans for Commercial Property, Dallas are higher than for residential property. The interest rates and terms & conditions will also depend on the kind of property, investors’ profile, location and the tenure of repayment.

The process of availing the loan is also more complex and the lender, which may be a bank or NBFC, takes longer in sanctioning the loan.

Fewer Tax Incentives

There are much fewer tax incentives for an investor of a Commercial Property, Dallas. There is no tax rebate or tax benefit on the EMI for repayment of loan for acquiring the Commercial Property, Dallas.

On the other hand, there are significant tax breaks for EMIs paid for residential property. This break brings the overall cost of acquiring a residential property down and is one of the major reason people prefer residential property.

More Road Bumps In Finding A Tenant

Finding the right kind of tenant for Commercial Property, Dallas like a shop or a showroom may be slightly difficult than finding a tenant for residential property. The property may remain vacant longer when one tenant moves out and another moves in due to the difficulty in finding a tenant.

Maintenance Woes

There is usually a larger expense in upkeep and maintenance of a Commercial Property, Dallas. In the case of a residential property, the maintenance expenses are limited to simple (tap repairs, minor electrical works, etc) fixtures and do not involve a huge cost.

The maintenance or renovation in a commercial set up will usually be huge. It is also important to note that a loan for renovation can be availed at the same rate of interest as the home loan if the two loans are being taken together.

Thorough Research Required

There needs to be thorough research by the investor as to what will be the overall cost in acquisition of the property, the taxes involved, the zonal laws and bylaws for renting out and the rental earning potential of that building or shop.

 Any mistake in any of these can prove to be really costly. The development of the entire area and potential of the rental to go up in future must also be kept in mind.

Taking investment decision in real estate is usually a difficult one, especially when it comes to choose between residential property and Commercial Property, Dallas. For someone who is new to investing in real estate, the decision is all the more difficult.

It is usually perceived that investing in commercial real estate is for big investors and businessmen.

We take a look at some of the advantages and disadvantages of investing in commercial real estate:

Higher Rental Income 

The rental yield in Commercial Property, Dallas is higher than in residential property, In fact, rental yields from Commercial Property, Dallas beats residential property hands down. The yield is usually in double digits from Commercial Property, Dallas.

If the investment is being made solely from the point of view of earning potential through rents, then Commercial Property, Dallas is undoubtedly better.

Ease in Dealing With Tenants

In the case of Commercial Property, Dallas, the tenant is usually a corporate, banks, retail chains. It is relatively easy to deal with such entities and there is no running around to get the rent.

If the tenant is reputed bank or corporate in one floor or one section of the property, there will be an appreciation in rental yield for the rest of the property.

Regular Inflow of Income

The income from Commercial Property, Dallas is usually regular and more consistent than in the case of residential property. This is also a significant advantage. Residential properties are fraught with a bit of uncertainty in terms of longevity of lease or rental duration.

In case of Commercial Property, Dallas, the rental is somewhat assured as there is longer lease duration.

With the ever-growing supply of Airbnb properties, there’s also an ever-growing supply of Airbnb Property , Dallas management services.

Hit Google (Bing or Yahoo)

It’s easily done, you search ‘Airbnb Property , Dallas managers’ and an endless list pops up

Check them out for sure, but don’t stop there. Keep scrolling down the page and onto subsequent pages.

Move past the pictures

We’ve all done it. Been taken by glamorous images in coffee table books and glossy magazines. These days we do it with websites

Know what you’ll pay (and what you’ll get)

The cost of Airbnb Property, Dallas management varies. Some property managers charge specific prices for specific tasks. Others, a percentage of your property’s rental and some, a mix of both. Don’t be afraid to ask questions so you can compare apples with apples and put your mind at ease.

Be clear on what matters to you

Only you know what’s important to you.

Talking is good

It sounds old-fashioned but talking is good. You a favor, pick up the phone and talk. Get a feel for the person you’re considering handing your property to and, ask heaps of questions. Compare what you hear and the property managers you speak to. Base your choice on facts … and gut instinct. Set up a meeting and take it from there.

The 3 Ways to Master Commercial Property Management slideshow below will highlight the following three areas that can hit PM’s the hardest, and what you can do to stay on top of your game:

Save Time with Accounting

Gone are the days of spreadsheets and paper files. Stop rifling through files and folders and centralize your data in a secure and accessible location. Most accounting tools also do CAM Reconciliation, so you can say goodbye to the worst headache of the year with a few easy clicks.

Have a Killer Maintenance Plan in Place

If one of your commercial properties is stuck with a maintenance problem for even a day, that could mean massive revenue losses for your tenant, leaving you with a bitter business. Online maintenance tracking and reporting is a great way to clean up messes and your act.

Market Your Technology to Attract Owners and Tenants

As their businesses grow and their needs for space become greater, renewed confidence in your management team could mean big money down the line.

If you follow the principles of long term investing, you can earn much higher returns than most debt instruments. Keep the following points in mind while investing.

Lease structure

Commercial lease strictures are very different from residential ones. They are structured as 3+3+3 or 5+5+5 meaning 9-year (or 15-year) lease with escalations every 3 ears (or 5 years). While analysing an investment, the investor has to understand how the lease is structured and the inherent risks involved. In general, the longer the lock-in, the better it is for the investor.

Base rents vs fitout rents

Developers often dupe investors by showing higher rental returns by including the fitout rent component while hustling them for a higher price. But here’s the catch: fitout rents are not permanent and are payable only for a fixed period (generally five years).

Security deposit

Security deposits in commercial properties vary between 10 and 12 months’ rent. Be careful when a tenant offers 6 months or less as it means that they could be looking at a short-term option or have cash flow issues. Startups typically tend to ask for smaller deposits and shorter lock-ins.

Diversification

We’ve all heard that diversification reduces risk. This is especially true in commercial real estate. If you invest all your savings in one property, you are exposing yourself to a higher risk.

In case the tenant vacates, rents will stop while maintenance payments, property taxes etc will have to be paid. Investing, Dallas in multiple properties across cities will reduce variance in income by diversifying property evel risk.

If you follow the principles of long term investing, you can earn much higher returns than most debt instruments. Keep the following points in mind while investing.

Location, Location, Location

Location is everything. Commercial properties provide returns through two avenues— rent and capital appreciation. Both are heavily dependent on the location. Look for locations where vacancy is less than 5%.

A high vacancy location gives tenants options to move and renegotiate rents.

Quality: B, B+ OR A

Two buildings may be in the same location, but the one boasting better quality will always get rented first. It will also attract better quality of tenants. Needless to say it will fetch the investor higher rents, better tenant retention and higher capital appreciation.

Multinational tenants are always willing to pay a premium for quality. Look for certifications like LEED gold or platinum ratings or buildings that have nicer looking lobbies, more elevators, higher ceiling heights and better views. Higher quality properties are also more liquid and can be sold much faster.

Demand vs Supply

This is one of the first things a savy investor has to analyse before committing to buying a commercial property. Every city has different micro-markets. Annual demand is also published regularly by brokers like JLL, Cushman and Knigh.

Market rent vs in-place rent

This is a slightly advanced concept that institutional investors use to see how risky the property is. Let’s assume that there are three properties available at more or less the same price but each with a tenant paying different rents.
* Building A has tenant paying Rs 10 and is selling for Rs 100
* Building B has tenant paying Rs 11 and is selling for Rs 105
* Building C has tenant paying Rs 9 and is selling for Rs 95

Quality of tenant

A good tenant can significantly increase the value of a commercial property. Looks for bluechip multinational tenants and avoid smaller and unknown companies. Good tenants pay rents on time, pay higher deposits, stay longer and increase the value of the property.

Interior fitouts

As an investor, you should always ask who has done the interior fitouts in the property. When an office is delivered in India, it is provided bare shell (like a garage). A tenant who has done his own fitouts is likely to stay longer in order to sufficiently recover the costs.

1031 DST investors give up control. 

Some investors want and need to have complete property management control.

The 1031 DST properties are illiquid. 

Anyone purchasing a 1031 DST must assume that their investment is not liquid.

Costs, fees and charges. 

While different exchange types have similar exchange costs for the Qualified Intermediary (QI), attorney, tax advisor etc., a DST is a private placement security that is purchased through a FINRA Registered Representative, who is paid a commission on the sale of this investment.

You must be an accredited investor. 

With a 1031 DST you must qualify as an accredited investor-an individual having income that exceeds $200,000 singly (or $300,000 with spouse) in each of the last two years, with reasonable expectations of the same income in the current year… or has a net worth of over $1,000,000 alone or with spouse (excluding the equity of that person’s primary residence).

You cannot raise new capital in a 1031 DST. 

Once the DST offering is closed, there can be no future contributions to the DST by any current or new investor. The “reserve fund” can help with less major unexpected expenses when they occur.

Small offering size. 

Because many DST offerings are smaller in nature $10-$75 million-they have a tendency to fully subscribe and close quickly. DST offerings can stay open a few days or months depending on the capital raise.

DSTs must adhere to strict prohibitions. 

Our national sponsors, we partner with, have thoroughly met these prohibitions for you… the seven are as follows:

• The DST can’t renegotiate existing loans or borrow more funds.
• The DST can’t reinvest proceeds from the sale of its real estate.
• The DST is limited to making minor, nonstructural capital improvements, in addition to those required by law.
• Any cash reserves held between income distribution dates can only be invested in short term debt obligations.
• All cash and other reserves must be paid out to investors.
• The DST can’t renegotiate existing leases or enter into new leases.

Rule 1: Like-Kind Property

To qualify as a 1031 exchange, the property being sold and the property being acquired must be “like-kind.

Rule 2: Investment or Business Property Only

A 1031 exchange is only applicable for Investment or business property, not personal property. In other words, you can’t swap one primary residence for another.

Rule 3: Greater or Equal Value

In order to completely avoid paying any taxes upon the sale of your property, the IRS requires the net market value and equity of the property purchased must be the same as, or greater than the property sold.  

Rule 4: Must Not Receive “Boot”

A Taxpayer Must Not Receive “Boot” in order for the exchange to be completely tax-free. Any boot received is taxable to the extent of gain realized on the exchange.

Rule 5: Same Tax Payer

The tax return, and name appearing on the title of the property being sold, must be the same as the tax return and title holder that buys the new property.

Rule 6: 45 Day Identification Window

The property owner has 45 calendar days, post-closing of the first property, to identify up to three potential properties of like-kind.

Rule 7: 180 Day Purchase Window

It’s necessary that the replacement property be received and the exchange completed no later than 180 days after the sale of the exchanged property OR the due date of the income tax return (with extensions) for the tax year in which the relinquished property was sold, whichever is earlier.