There are many types of commercial properties available to those who work in the commercial real estate industry. Many people like to work in a specific area by working with only one or two types of commercial properties. They do this because they have expertise with that specific type of property.

Commercial properties differ more than in just their appearance and use. How you purchase, sell, operate, manage, evaluate, and price each property can be very different. Although there are some similarities, being an expert in one or two properties can greatly increase your ability to analyze good deals and maximize your profit potential. When you know the inside and out of the processes that take place with a certain type of property, know what hidden things to look for, and what mistakes to avoid, you are less likely to run into problems, and will generate positive, long lasting results.

Let’s look at the main commercial properties that you may already be involved with, or are thinking about moving into.

The first are office buildings, or office parks. The term office can be used to refer to floors, parts of floors, an entire building, or an entire office park with multiple buildings positioned in a community type setting. Office space is used for a variety of reasons. It can be used for actual offices for companies, or it can be used for places of business operations, or to meet a tenant’s specific functional and technical needs. An example of this would be an office building for medical purposes.

Office buildings can be segmented into three basic levels. The first is low rise, which has fewer than 7 stories above ground. A mid-rise has between 7 and 25 stories above ground. A high-rise has more than 25 stories above ground. These buildings are often rented by the square foot according to the total usable square feet available to the tenant.

The next type of commercial property is retail property. These are places of business where products and services are provided. There are many types of retail properties which include big boxes, outlet centers, strip centers, regional centers and power centers. Each of these has distinct characteristics that differentiate one from another. Business owners can better choose where they want to lease by identifying their product position, where the best location is, and the type of retail center that will best sell their products and services.

A big box is a large, free-standing building that is often much like a huge warehouse. They can often be found near major shopping centers and along major corridors. Companies such as Wal-Mart, Home Depot and Target are all example of big boxes.

Outlet centers are usually located in tourist or rural locations, and the businesses there offer their products and services at a discount. Strip centers are consecutive narrow parcels that have a variety of stores. They are often found along main roads and commercial corridors.

Regional centers are characterized by an enclosed, inward orientation of the stores. A walkway or common area connects the stores that offer a variety of products and services. There is usually a large, common parking lot found along the perimeter of the regional center.

Power centers are areas of business where large retailers, including large discount centers lease out the buildings. Category killers can also be found here. These are companies that offer a large selection at low prices. Ross, Mervyns, and Kohl’s can all be found in power centers. Think of the one stop place to shop retail center, and you have a power center.

Any of these types of retail centers can be chosen areas of specialization for an investor, developer or builder. This gives them a competitive advantage in the commercial real estate industry because it is the only thing in which they concentrate their efforts. You can bet there is not one thing that can pass by these people when it comes to retail centers, and they know exactly how to maximize their resources.

Industrial and warehouse properties are the next category of commercial property where you will find freestanding properties, research and development, large manufacturing, as well as industrial park properties.

Freestanding industrial properties can vary greatly in construction type, design, and overall function. They stand alone, and are usually occupied by an end user, so the building is specific to a special purpose.

A research and development property is characterized by having office space and manufacturing on the premises. You can find them most often near universities, and close to other locations of professionals.

Industrial parks are large, planned developments that can be used for special scientific and technological use, or sophisticated communications uses. They have many buildings for mixed-purpose or a single purpose that are scattered in an often functional way.

Industrial buildings and warehouses are crucial to a city’s economic development, and cities often provide tax incentives when jobs are provided and new companies are brought to a city, especially to one experiencing rapid growth.

Multi-family property is another type of commercial property in which you can specialize. They offer huge opportunities to create value. A multi-family property is not considered a commercial property unless it is greater than 5 units. Duplexes and fourplexes are not considered commercial properties, though they can be a great investment. The larger the apartment complex, for example more than 100 units, the more money you will be able to return on investment. These multi-family units have living space, appliances and amenities. Multi-family units can range from low-end to luxury type units.

The last type of commercial property is raw land. Raw land is characterized by untouched land with no improvements such as utilities and roads. It can be the most difficult property to involve yourself with; however, it can return the greatest results.

Whichever property you decide to specialize in, only begin a new project in a new area with a person who has lots of experience. You can learn a lot from someone by using this strategy. It will give you a solid foundation to do the next project on your own. This partner or associate will help you to gain the experience and insight that may otherwise take you years to learn.

_{»crosslinked«}

Filed Under: Articles Tagged with Appearance, Business Operations, Commercial Real Estate, Estate Empire, Expert, Good Deals, Google, Investments, Low Rise, Many People, Medical Purposes, Mid Rise, Office Buildings, Office Space, property, Real Estate, Real People, Square Feet, Square Foot, Usable Square Feet, Variety

Most commercial property owners, even those who use professional accountants, fail to take advantage of cost segregation, a tax mechanism that could generate substantial savings in federal income taxes.

While most accountants are familiar with the approach, some are hesitant to recommend it without a documented analysis of correct depreciation amounts. The numerous intricacies of IRS designated building components make it difficult for some accounting professionals to be cognizant of all applicable items on a specific property. CPAs recognize that in order for the client to fully benefit, it is usually necessary to seek a real estate specialist to provide an independent report supporting the owner’s depreciation schedule.

Although it is vastly under-utilized, cost segregation is no wildly speculative accounting tool. In fact, the American Institute of Certified Public Accountants’ National Journal of Accountancy has published numerous articles in support of cost segregation.

Cost segregation identifies applicable components and establishes the value and correct time line for depreciation. Under typical circumstances, depreciation is spread out over as long as 39 years. However, cost segregation applies depreciation to parts of the property in 5-,7- and 15-year increments. This acceleration in depreciation time reduces the income subject to federal taxes. This method does not dictate alternative minimum tax issues.

Professionals Prepare Detailed Reports.

To perform a cost segregation analysis, initially the building’s cost basis for construction, renovation and repairs is reviewed. A technician goes on site to take detailed measurements and observe the quality and condition of the property. After the site visit, he or she calculates the value of the property using widely accepted pricing resources and local economic conditions.

A cost segregation study produces a professional document that is backed by careful research. The results are summarized in a detailed report, documenting the amount of 5-,7- and 15-year property that qualifies for short-life depreciation.

Real estate appraisers or engineering firms typically have the knowledge to perform the detailed cost segregation studies, frequently at the recommendation of the owner’s tax preparer. Preparing the study requires expertise in evaluating real estate and complete command of the regulations that detail these depreciation options. Internal Revenue Code regulations outline approximately 130 categories of property, which qualify for shorter lives.

Cost segregation regulations contain a lot of variables that are not necessarily intuitive. The 5-year property includes items such as carpet and vinyl flooring. Seven-year property may reflect signs and parking lot striping. Fifteen-year property encompasses paving and landscaping.

Many CPAs Recommend Cost Segregation

Most property owners instinctively believe their CPAs are performing cost segregation for them, but research has suggested that this tool is used only 5% – 10% of the time. CPAs and other tax preparers may not routinely perform the study because it involves real estate appraisal methodology and specialized knowledge outside the scope of a typical tax practice. Even though cost segregation may be unfamiliar territory to some accounting professionals, it is highly praised by many accountants.

“Cost segregation is a powerful and necessary part of accurately calculating depreciation for real property,” comments CPA Bill Bandy of Blakely and Bandy, a Houston-based accounting firm. “A properly prepared study is invaluable to me as a CPA because it provides reliable support for preparing the depreciation schedule and reducing my client’s taxes.” Recent changes in tax regulations make cost segregation more attractive and allow it to be implemented years after the completion of a real estate purchase.

How Does It Work?

Historically, most depreciation schedules are split between land and long-life property. Long-life property depreciates over 27.5 years for apartments and 39 years for most commercial properties. A cost segregation study can typically allocate 20% to 40% of the improvement basis to short-life categories, and sometimes more.

High-income owners typically pay a 35% federal tax rate on ordinary income and a 15% rate on capital gains. The mechanics of reporting the gain on a sale usually allocate most of the gain to capital gains, which is taxed at 15%.

A cost segregation study actually reduces the amount of long-life property, which is recaptured at 25% by allocating more of the basis to the 5-,7- and 15-year property. If cost segregation is utilized from inception until a gain on the property is recognized, it can reduce the federal tax rate from 35% to 15% for most investors. The exceptions are C corporations, which pay the same tax rate for either ordinary income or capital gains.

How Much Can It Save?

A recent client of the firm realized a payback ratio for the first year savings at 4:1 and the payback ratio for the first five years at 20:1.

Who Prepares Cost Segregation Studies Today?

Appraisal and engineering firms, Big Four firms and spin-offs of Big Four firms are the primary providers of cost segregation studies. Some accounting firms offer the service but frequently outsource the actual report preparation to an appraisal or engineering firm. With the introduction of new providers, the price gap has widened between very low cost analytical studies and much higher large firm rates.

Do All Properties Benefit From Cost Segregation?

Cost segregation is typically effective and financially feasible for properties that have an improvement basis of $500,000 or higher.

Properties with a great deal of site-improvement, including landscaping and parking, generate great results.

Cost segregation can be performed for properties anywhere in the United States. It is effective for apartments, office, retail, industrial, self-storage and many special use properties.

“Clients expect us to seek out and utilize tools which will minimize their federal taxes,” says CPA Sheldon J. Donner of Donner Weiser & Associates, P.C., an Atlanta-based CPA and consulting firm. “Cost segregation is an appropriate, conservative and cost effective tool to substantially reduce federal and state income taxes. Our clients have been extremely pleased with the results.”

When Should I Obtain A Cost Segregation Report?

“We routinely obtain a cost segregation study after purchasing an investment property,” said Jeff Harris, chief financial officer of Boxer Properties, a national property investment firm. It typically makes sense to obtain a cost segregation report the year a property is purchased or built. Property owners who purchased or constructed property after 1986,often can benefit substantially by recouping previously under-reported depreciation without filing amended tax returns.

Filed Under: Articles Tagged with Alternative Minimum Tax, American Institute Of Certified Public Accountants, Certified Public Accountants, Commercial Real Estate, Correct Time, Cost Basis, cost segregation, Cost Segregation Study, Cpas, Depreciation Schedule, Federal Income Taxes, Federal Taxes, Google, Income Subject, Independent Report, Institute Of Certified Public Accountants, Journal Of Accountancy, lower federal income tax, poconnor, Pricing Resources, Professional Accountants, Professional Document, Segregation Analysis, Typical Circumstances

For small companies, an office is an overhead that many feel they can do without, at least when starting up, but as a business grows and takes on staff, an office becomes an essential.

Even before that, there are many arguments in favour of a physical presence; an office can add credibility, and suggests permanence, that the company is going to be around in the future, perhaps particularly important for new companies.

But how much space should you rent or buy? Obviously this will depend on the employees that you expect to be working there, but you will need to factor in growth plans, whether you require an open plan working environment (allow 75-100 sq ft for each person) or individual offices (about 175 sq.ft) and meeting areas (215 sq.ft will accommodate a table and chairs for about six to eight people).

An alternative, particularly if your growth is uncertain is a serviced office, where you rent space by the number of workstations you require and by the month. This may not only help with cash flow, but also allows a company to grow or contract in a fairly flexible manner. There are no capital outlay costs for furniture or telephone equipment, all of which are provided and if you need meeting space, you pay for it by the hour.

Additional services, such as secretarial assistance are also available as required and the telephone is answered by a dedicated receptionist and in your company’s name.

On a price per sq.ft basis, serviced offices are more expensive, but this additional cost is often outweighed by the fact you are paying for just the space your business needs.

Filed Under: Articles Tagged with Additional Services, Adsense, Capital Outlay, Cash Flow, Commercial Real Estate, Credibility, Favour, Flexible Manner, Furniture, Google, Offices, Permanence, Physical Presence, property, Real Estate, Receptionist, Secretarial Assistance, Serviced Office, Serviced Offices, Sq Ft, Table And Chairs, Telephone Equipment, Working Environment, Workstations

Commercial real estate is a wonderful, exciting business that can offer a wealth of opportunity for those who look for it! Many people are often hesitant to enter such a market as commercial real estate for many different reasons. In fact, there are some major misconceptions about commercial real estate which I am going to address here.

Many people who hear about commercial real estate, but aren’t necessarily in the business, often use the expression “Location, location, location!” Many people associate this expression as the truth, that the three most important attributes about a property are “Location, location, location!”

I am here to tell you- this is absolutely not the case! Now, I am not going to say location is not important, but what if you have a beautiful location for a mountain resort, complete with snowy hills, a perfect location for a lodge, and beautiful mountain views? What you want to do to the property is improve it for a weekend getaway for romantic couples with a beautiful lodge, resort, luxury type housing, and perhaps some individual cottages overlooking the green forest. Sounds great, right?

The perfect location- you can’t beat it! But, you learn that the zoning for this property is residential, R1, to be exact. The use is only one single family residence per acre, and no commercial property allowed. What happened to your “Location, location, location?” It flew out the window!

The most important aspect of a property is the use. What is it intended for by designation of the city or county? It does not matter where the property is, if you cannot get the zoning that is in the realm of your intended use.

It is possible to get properties rezoned, especially as cities change and grow. Be sure to consult with the city or county to determine if these changes are even possible, because you do not want to buy a property that you cannot rezone, and be left with an unprofitable property on your hands.

Most people believe that commercial real estate is complicated and you need a special education or know how to succeed in the business. Many think that commercial real estate is filled with international finance, heavy and complicated math, complicated tax rules, and forms and applications that are just too complicated to understand correctly.

I am happy to tell you this misconception is the worst, because it puts a road block in front of many people’s aspirations to become a commercial real estate insider. Let me put this misconception to rest. There is math involved, and most of it is not at all complicated: simple ratios, adding, subtracting and multiplying. What is even better is you don’t have to do the math. There are others who can do that for you. The same is true with property management, inspecting the property, and doing the year-end tax report. In fact, commercial real estate is less complicated than residential real estate because you can focus your energies on a single deal that will be worth perhaps 10, 20, even 50 residential deals and more!

Let me put it into perspective for you. If you owned a business (many of you may), would you create strategies, keep the books, manage the many locations, sell on the front floor, and take out the trash after the day was over? I think not! Commercial real estate is made up of many people whom are there to help you with whatever you need. You must position yourself as a real estate insider, which is a leader in the business.

Another misconception is commercial real estate is management intensive, that you must manage every property you own. Let me tell you when you end up owning 10 or more properties, this is almost impossible to do! You do not have to actually manage your properties yourself, so you can concentrate on creating more deals. Hire a company or set a team in place to take care of this “day-to-day” business.

As you can see, what is passed around in dialogue about commercial real estate is not always true. Before you take everything to heart, be sure to get your facts straight. In fact, many people in this profession speak about commercial real estate as a business in which only the savvy and sophisticated can succeed. They often act this way because they want to keep people out of the market by differentiating themselves. If you were in this position, you would too!

Filed Under: Articles Tagged with Acre, Attributes, Beautiful Mountain, Commercial Real Estate, Couples Resort, Designation, Expression, Google, Green Forest, Individual Cottages, Location Location Location, Many Different Reasons, Many People, Misconceptions, R1, Resort Luxury, Romantic Couples, Single Family Residence, Snowy Hills, Weekend Getaway

Commercial Real Estate refers to the property that has potential to generate extra income for the owner of real estate. Commercial real estate generally includes office buildings, retail properties, apartment units, condos and raw land. Every property that can produce revenue for the owner is known as commercial real estate. It doesn’t include habitable real estate like houses or apartment buildings.

In 21st century, large number of people is generating income with commercial real estate. Commercial real estate business is based on certain principles. These principles are generally same for property owner, developer as well as for commercial real estate agent. Commercial real estate agent helps you to identify the best features of commercial real estate agent. Real estate agent enables you to make a finest deal of commercial real estate. Commercial estate agent is helpful to both buyers as well as tenants.

You should choose best commercial real estate as per your requirements. Choose your property at best location that has great future. Commercial real estate at good location will offer more benefits in the coming days. You’ve to choose finest piece of land that you can use efficiently. You may select commercial real estate nearby high traffic areas that can be easily used for full-service restaurants, hotels, stores or other shopping malls.

Investment in commercial real estate business is the best way to get more revenues. Always keep in mind that a right time investment is the best opportunity to earn more profits. You should consult financial advisors that will provide help to find the best commercial real estate. Investment in commercial real estate is good for large as well as small-scale businessmen.

Buyers should check the reputation of commercial real estate provider. Before any type of agreement or purchase, they should check rate, terms & conditions, and other essential aspects of commercial real estate for the best deal.

Filed Under: Articles Tagged with Apartment Buildings, Apartment Units, Businessmen, Commercial Real Estate, Commercial Real Estate Investment, Estate Business, Estate Provider, Extra Income, Financial Advisors, Google, Office Buildings, Property Owner, Raw Land, Real Estate Agent, Real Estate Investment, Retail Properties, Service Restaurants, Shopping Malls, Time Investment, Traffic Areas