by Prince Licaylicay | Feb 25, 2020 | All Articles, Buying, Leasing
Many of our clients are conflicted about whether to buy or lease a commercial property. There are a variety of factors small business owners must consider when it comes to deciding whether to buy or lease a commercial property, but at the end of the day the numbers need to make sense for your business.
Finding the right location is only part of the equation for a business owner who’s in the market for new commercial space. Before looking at specific locations, an analysis should be completed showing the benefits of each. There may be times where the business owner does not have an option.
Driving factors that play a key role in the decision-making process is both rental rates and property values. Let’s take a look at how these two factors can significantly change whether it makes sense to buy or lease a commercial space.
The impact of increasing rent and property values on commercial property directly affect whether buying or selling commercial space makes sense. If rents and property values are increasing in a certain area, it’s often better to purchase commercial real estate as opposed to leasing. By purchasing a property, you’re getting the benefit of appreciated value should you ever decide to sell.
In addition to the impact of increasing property values, there are other financial incentives to purchasing a commercial property. Regarding taxes, there are times when the initial outlay that is used to purchase a commercial property is not deductible. This allows for the buyer to depreciate the cost of the property over time. For those who financed the property can receive tax deductions for any interest payments.
If you’re a well-established business and have been operating awhile, but you’ve not purchased any commercial space, it may be time to look into building an asset through the purchase of real estate. However, if you’re business is a startup, leasing may be a better option until your business is solidified.
Buying a commercial space gives you ultimate control of the property. It allows you the freedom to make extensive renovations both inside and offers more options than leasing a space. Renovating a leased property typically requires running any type of changes by the landlord or even may stipulate an outright ban on renovations.
If having a certain location is important, buying may open up an opportunity where no suitable properties are currently up for lease. Purchasing in a prime location (for example, a restaurant or retail establishment in an area with high foot traffic) can mean the difference between the success or failure of your business.
Need help deciding whether to buy or lease a commercial property? If you’re in the market commercial space it can be difficult to know whether it makes more sense to purchase or lease. By working with a seasoned commercial real estate team like ICRE Investment Group, we can help you determine what is the best move for the future of your business.
Even after outlining all the information above, investing in CRE can still seem daunting. That’s why the Leveraged CRE Investment Team at Commercial Properties, Inc. is here to help you achieve your investment goals. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Need help on how to get started investing in commercial real estate? We got you covered! We prepared a free e-book that will serve as your guide to achieve your long-term business goals or obtain that property you’ve always been dreaming of!
Phill Tomlinson is a commercial real estate broker with Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, and owner of the Leveraged CRE Investment Team specializing in investment sales and tenant/landlord representation in the Phoenix and Scottsdale submarkets. Phill applies over 21 years of experience in the Real Estate industry helping investors and owners maximize their returns.
Bookmark www.leveragedcre.com to learn more about the Commercial Real Estate market and keep informed of relevant real estate strategies designed to maximize your income property investment results. Connect and follow Phill on Social Media at sm.leveragedcre.com/smplatform. #LeveragedCRE
by Prince Licaylicay | Feb 17, 2020 | Investing, Selling
LCRE Investment Team is proud to have exclusively represented the Buyer, 52nd Street, a Joint Venture, in the purchase of a Black Bear Diner located at 1420 Market Place Drive, Great Falls MT 59404. This Retail Commercial Building was an Absolute Net Investment. It was built in 2007 with 7,365 square feet. It Sold for $3,350,000.00 at $454.79 SF on July 3rd, 2019. The Cap Rate was 6.8% with an NOI of $227,812.50.
Black Bear Diner is a fast-growing, community-oriented, family dining concept that offers great food in a fun, bear-themed atmosphere. Born from a desire to bring home-style comfort food classics and personal service back to the dining experience, the brand is strategically growing its national footprint. Black Bear Diner has approximately 124 locations in 12 states, including Arizona, California, Colorado, Idaho, Oregon, Texas, and Washington. In 2017, Nation’s Restaurant News highlighted the brand as a “disruptor” in the family dining market, noting market share gains against numerous legacy brands, while Franchise Times ranked it as #242 on its Next 300 Franchises to Watch in 2017 list.
1420 Market Place Drive Guarabtor: MERIDIAN RESTAURANTS
Meridian Restaurants was founded in 2002 with 14 restaurants. Today, Meridian now has 127 restaurants consisting of four top-tier brands across eleven states: Burger King, El Pollo Loco, Chili’s, and Black Bear Diner. The tenant; NDM Restaurants, Limited Company; is a wholly owned subsidiary of Meridian Restaurants Unlimited, Limited Company.
Need help on how to get started investing in commercial real estate? We got you covered! We prepared a free e-book that will serve as your guide to achieve your long-term business goals or obtain that property you’ve always been dreaming of!
Phill Tomlinson is a commercial real estate broker with Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, and owner of the Leveraged CRE Investment Team specializing in investment sales and tenant/landlord representation in the Phoenix and Scottsdale submarkets. Phill applies over 21 years of experience in the Real Estate industry helping investors and owners maximize their returns.
Bookmark www.leveragedcre.com to learn more about the Commercial Real Estate market and keep informed of relevant real estate strategies designed to maximize your income property investment results. Connect and follow Phill on Social Media at https://linktr.ee/PhillTomlinson. #LeveragedCRE
by Prince Licaylicay | Feb 6, 2020 | All Articles
There are many factors to consider when choosing the best business entity for your needs. If you’re investing in real estate, it’s generally recommended to take the title in the name of an entity rather than your personal name. Whether a limited liability company (LLC) is right for you depends on several factors.
Benefits of Business Entity Formation
Business entities are typically formed for two main reasons: liability protection and tax advantages. Entities such as corporations and LLCs generally protect owners and managers from personal liability for the company’s debts, though some exceptions apply. For example, in a limited partnership, general partners remain liable for the partnership’s debts, similar to sole proprietorships. However, certain scenarios might favor a limited partnership over an LLC.
Regulatory Requirements for Certain Professions
In some cases, state regulations determine the type of entity you must form. For instance, the Arizona Department of Real Estate only allows licensees to hold their real estate license in a professional corporation (P.C.) or a professional limited liability company (P.L.L.C.). This is because Arizona law holds individuals rendering professional services through a P.C. or P.L.L.C. personally liable for certain actions, particularly those related to their professional responsibilities. Other licensed professions in Arizona may have similar regulations. Therefore, if you are engaged in a licensed profession, check whether there are any entity requirements.
Tax Considerations for Business Entities
I often help clients with entity formation for real estate investments or new businesses. Although corporations, LLCs, and limited partnerships provide a layer of liability protection, tax implications vary based on the entity. Some tax benefits, such as investing in Opportunity Zones or using the small business stock capital gains exclusion, may require specific types of entities to take full advantage. Recent changes in U.S. tax laws have also shifted the benefits of partnership taxation, making it less favorable than before. To understand the tax implications of your entity choice, consult with a tax advisor. Our tax team regularly helps clients make these decisions.
Special Considerations for Foreign Investors
I work with many Canadian and Australian real estate investors who face unique cross-border taxation issues. For example, the Canada Revenue Agency does not recognize LLCs or PLLCs for tax purposes, unlike the IRS. Similarly, Australian investors have their own tax challenges. If you’re a non-U.S. investor, it’s crucial to consult with a tax advisor who understands both U.S. and foreign tax systems to ensure you choose the right entity for your real estate investments.
Steps to Forming a Business Entity
Once you choose the right entity, you need to file the necessary documents with the Arizona Corporation Commission or the Arizona Secretary of State. In addition, you may need bylaws, a shareholder’s agreement, or an operating agreement, depending on the entity type. These documents outline management procedures, voting rights, ownership transfers, buy-sell agreements, and more. If your entity has multiple owners, it’s best to address these issues when everyone is on good terms. Discussing these matters upfront helps prevent future conflicts.
Risks of Relying on Insurance Alone
You might think, “This sounds like a lot of work and expense. Maybe I’ll just get liability insurance instead.” While liability insurance is essential, it isn’t enough to protect you fully. For instance, insurance policies often contain exclusions, and claims can be denied. If you hold the property in your personal name and an uncovered event occurs, you could be personally liable for damages. Additionally, forming an entity and drafting the necessary agreements doesn’t have to be expensive. In fact, many business owners who skip these steps end up spending far more on litigation when disputes arise.
Conclusion: Choosing the Right Entity Matters
Choosing the correct business entity is a critical decision. Take your time, do your research, and consult with professionals to guide you through the process. Proper planning now can save you significant trouble down the road.
Need assistance with your 1031 Exchange or DST? We’ve got you covered!
We’ve prepared a comprehensive, free e-book designed to guide you in achieving your long-term business goals or acquiring that dream property you’ve been eyeing.
Meet The LeveragedCRE Investment Team
Phill Tomlinson and Eric Butler are seasoned commercial real estate brokers with over 44 years of combined experience. They lead the LeveragedCRE Investment Team at Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, specializing in investment sales and tenant/landlord representation across the Phoenix and Scottsdale submarkets.
The team leverages their extensive knowledge and expertise to help investors and property owners maximize their returns and navigate complex real estate transactions with confidence.
Stay informed with the latest in Commercial Real Estate strategies designed to enhance your income property investment results by bookmarking www.leveragedcre.com. Let us help you stay ahead in the market!
