NYC Commercial Real Estate Market Is Ready
With the progressive softening of the NYC commercial real estate market, lawyers, doctors, CPAs, all other service professionals as well as business owners are uniquely positioned for an opportunity of a lifetime: to own their own offices. The cash and credit strapped large investors have left a widening gap in NYC for smaller investors to leap into. As a result of overleveraged owners, declining rents and mortgages coming due or adjusting, more and more office properties are coming to market at discounted prices.*
Are You Ready?
The Benefits
Owning your own offices has multiple advantages for your professional practice or business:
A. Thwart Future Rent Increases-Office rent is typically the largest overhead line item for every professional practice or business. Although the past year’s downturn has caused rents to decrease significantly, when the market turns around and the likelihood of inflation becomes reality, rents will resume their upward climb-threatening your ability to remain in your office space in the long-term. Owing your own user-occupied property affords you with predictability and stability of you business location.
B. Acquire a Real Business Asset-Negotiating a savvy sublease provision in a lease agreement may afford you with an “asset” during the term of the lease, but its benefits are circumscribed. In purchasing a property for your professional practice or business use, you acquire a real asset that over time will appreciate in value. Moreover, much like owning any other property, your business will likely benefit from the ability to deduct mortgage interest, real estate taxes and insurance of the property. Of course a substantive consultation with an experienced CPA to discuss the details would not only be in order but mandatory for any value-oriented investor.
C. Additional Tax Advantages of Cost Segregation-Perhaps the most compelling financial benefit of owning your own office property is the ability to accelerate the depreciation on commercial real estate via cost segregation. Cost segregation allows you to claim the depreciation of the various components of your property (such as land, building and tangible personal property) at different prescribed terms, allowing you to benefit from a short term tax rebate from your investment. Additionally this methodology is invaluable in the planning for future anticipated maintenance to your property of structures such as the roof, windows, doors, heating and plumbing systems etc…. Caution: A substantive discussion with your CPA in collaboration with engineers/appraisers is required to delineate with accuracy the extent of the availability of this tax option, amount and terms in claiming cost segregation on your property.
D. Available and Preferential Credit for User-Occupied Properties-With the exception of long established client relationships, most lenders have practically shut their doors to investors in what could be the best market to acquire property in decades. Conversely the Small Business Administration is offering an unprecedented opportunity to businesses and service professionals alike to purchase their own user-occupied properties or offices. The SBA’s 504 program’s purpose is to extend credit to businesses for the acquisition of real property. It offers low interest rates, loans up to 90% LTV if 51% or more of the property is used by your business or practice and it is readily available.
E. Build Equity in Your Business Asset-In lieu of making monthly rental payments for which no future return can be expected, you will be making monthly mortgage payments and building equity in y our office property. Moreover, if you take advantage of the SBA’s 504 program, you will have 49% of the space that you can rent out on a monthly basis to help subsidize your mortgage payments, real estate taxes and insurance–while building additional equity.
See: A Time to Buy User-Occupied Real Estate.
The Invitation:
Is it worth your time to explore this option? Email Ms. O’Hare today at mohare@frandimapropertiesllc.com for additional details and information.
