Should I buy or rent my next commercial space, whether a store , an office or a warehouse?

Now, more than ever before, the answer should be to buy your next space.  Take the analysis below of an actual office condo listed for sale/lease in Winter Park FL.

1,167 SQ FT OFFICE ANALYSIS

Lease vs Ownership

3586 Aloma Ave Suite 5, Winter Park FL

Lease an Office/Retail Space

$1300 per month

Year 1 Rent $15,600

Year 2 Rent $16,068

Year 3 Rent $16,550

Year 4 Rent $17,046

Year 5 Rent $17,,558

Total Rent Paid 5 years <$82,822>
Sales Tax paid on rent <$ 5,383>
Total <$88,205>

PURCHASE an Office/Retail Space

Price $175,000

Equity $   26,000

Mortgage $149,000 @5.5% 20year = $1,026 /Mo

Projected Value @3% appreciation  $202,870

less real estate commission 6%        $ 12,172

MORTGAGE BALANCE $125,440

Net $65,258

             The difference in  5 years  $153,463

*There are no provisions in this analysis for the income and expenses of owning your office such as property taxes, insurance and maintenance.
And I haven’t even shown you the tax advantage of interest and depreciation deductions…

This is the reason you need to own your own building be it a condominium office or free standing.
I have kept the figures low and if you look at a long term approach the 3% appreciation is correct.  The added fact that currently Central Florida is in a very depressed Commercial Market, properties are being sold at much discounted prices and when inflation hits 1-3 years out, this appreciation factor will grow well beyond my 3% growth average.

More value will be created in Central Florida Commercial Real Estate over the next 18 months than in the next 18 years.

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The following was just issued by a National Association of Realtors economist.  They are supposed to have a better crystal ball than I have.

Your tax trim notices should get your attention this month.   If you think the tax assessment is too high on your commercial properties, call me.  I will only handle those that I feel are excessive.  If I can’t reduce your county assessments, there is no charge!

FLA COMMERCIAL MARKETS TURNING AROUND
ORLANDO, Fla. – Aug. 12, 2011
The “2011 Florida Commercial Market Watch”, released by
Florida Realtors, finds tempered optimism in the six cities
tracked by NAR researchers, with job creation leading most
markets.”Job growth creates demand for commercial space,
and the (national) economy should be adding between 1.5
million and 2 million jobs annually both this year and in 2012,
with the unemployment rate falling to 8.0 percent by the end
of next year,” says Lawrence Yun, NAR chief economist.

“Given the minimal new supply in recent years, the rising
demand means vacancy rates will be trending down in the
commercial real estate sectors. Individual markets are now
stabilizing and in some cases rising.”In Florida, NAR
forecasts employment growth in each of the major cities
through 2012. Orlando tops the prediction with 62,000
new jobs expected in 2011 and 2012. Miami follows it with
43,000, Fort Lauderdale with 29,000, and Jacksonville with
24,000. Tampa and West Palm Beach tied at 23,000. The
Society of Industrial and Office Realtors, in its SIOR
Commercial Real Estate Index, an attitudinal survey of more
than 360 market experts, shows a firming up of market
fundamentals. Although the SIOR index remains lower than
a level of 100 that represents a balanced marketplace, it has
had six consecutive quarterly improvements after almost
three years of decline. The last time the index was at 100
was in the third quarter of 2007.NAR, working with Real
Capital Analytics, projects an increased amount of
commercial investment in all Florida cities studied in 2011
when compared to 2010.Jacksonville – 100% increase.
Investor volume in 2011 is projected to hit $0.8 billion –
double the $0.4 billion invested in 2010.Miami – 75%
increase. Investor volume in 2011 should total $2.8 billion
compared to $1.6 billion in 2010.Orlando – 29% increase
The $1.8 billion NAR projects investors will put into
commercial real estate in 2011 surpasses the $1.4 billion
invested in 2010.West Palm Beach – 17%Volume from
investors in 2011 will be $1.4 billion, according to NAR,
compared to $1.2 billion in 2010.Fort Lauderdale – 10%.
2011 investor volume should hit $2.1 billion, says NAR;
in 2010, it was $1.9 billion Tampa – 7%.  The $1.5 billion
in investment expected for 2011 surpasses the $1.4 billion
spent in 2010.

Charlie Brenner



The post Is this the bottom of the Commercial Real Estate Market in Central Florida? | August Newsletter appeared first on Charlie Brenner.

Address: 1844 Longwood Lake Mary Road Suite 1050, Longwood, FL 32750
Building Size: 5,000 Sq Ft±
Land Size: 2 Ac± (Condo)
Zoning: GC2/PCD
Parking: 20+
Water: City
Sewer: Yes
Year Built: 2005
Construction: Concrete Block
Roof: Metal

• Major Highway Frontage
• 5,000 sq ft
• 1,600 sq ft office
• Excellent Parking
• Great Location just off Highway 427
• Seller may consider a Lease Back
• $97 per sq ft!
• Rear Load Overhead Door

The post MULTI TENANT INVESTOR DELIGHT OFFICE/WAREHOUSE -Longwood, FL appeared first on Charlie Brenner.

Address: 2009 2011 & 2011 1-2 S. Orange Avenue, Orlando, FL 32806
Building Size: 5,072 Sq Ft±
Land Size: 6,070 Ac±
Zoning: MU-1/T/SP
Year Built: 1952

2009 & 2011 South Orange Avenue are two buildings located side by side. The building to the North is 1875 square feet and the building to the South is 3197 square feet. This site is close to ORMC and would be excellent for a medical retail store. The building fronts on Orange Avenue which is the main road that runs through downtown Orlando.

The price has been reduces to $495,000 which is less than $99 per square foot.

The post Four Unit Retail Center on Orange Aveunue – Orlando, FL appeared first on Charlie Brenner.

Address: 417 At Echo Court, Oviedo, FL 32765
Land Size: 5 Ac±
Zoning: A-1

• 5 Acres close to 426 and 417
• Adjacent Property available for total of 14 acres
• Easy Access to all of NE Orlando
• Roads and Utilities in close proximity
• Ideal location for ALF facility

The post 5 Acre Development Property fronts on 417 – Oviedo, FL appeared first on Charlie Brenner.

Address: 3015 Forsyth Road, Winter Park, FL 32792
Land Size: 9.76 Ac±
Zoning: I-1/I-5
Water: Yes
Sewer: Yes
Electric: Yes

• 10 ACRE INDUSTRIAL LAND
• LAST LARGE TRACT AVAILABLE
• EASY ACCESS TO 417 AND 50
• ZONED I-1/I-5
• APPROX 7.5 ACRES USEABLE
• CLOSE TO UNIVERSITY BLVD
• OWNER MOTIVATED!!

The post 10 Ac Industrial Land For Sale East Orlando – Winter Park, FL appeared first on Charlie Brenner.

Address: 1890 S. US Highway 17 92, Longwood, FL 32750
Land Size: 2.5 Ac±
Zoning: PUD (Commercial)
Water: Yes Electric: Yes

• Major Highway Frontage
• 200± feet fronting US Highway 17-92
• Traffic count of 54,000 per day
• Property also fronts Lake Fairy
• Excellent restaurant or retail location
• Possible annexation to Longwood (utilities)
• Currently body shop and used car sales on site

The post Highway Commercial Site – Longwood, FL appeared first on Charlie Brenner.

In today’s market, many real estate investors are placed in a unique position. Incredible replacement (purchase) properties exist, however, relinquished (sale) properties may take longer to sell in another marketplace. This is noticeable, particularly in Florida, as a result of numerous investors “moving” their investment properties from other states (which may not have a high demand) to Florida (many areas which are experiencing a “sellers market”). This situation creates one question we hear daily from our clients. Can we perform a reverse exchange? The answer, at Asset Preservation, Inc. is “Yes.”

Definition: A Reverse Exchange is a 1031 exchange transaction in which the replacement property is acquired prior to the closing of the relinquished property.

The Opportunity: This exchange variation allows investors to immediately purchase an ideal replacement property. It may also provide additional time to accomplish the actual exchange beyond the typical 180-day time frame.

The Challenge: Although many tax and legal advisors are comfortable with the reverse exchange format, there are no specific Regulations which address this variation. There are some court cases which serve as guidelines, but nothing as solid as IRS issued Regulations.

One way to avoid the reverse exchange is to delay the “closing” of the new replacement property in some manner. Some typical strategies to delay the closing include:

1. Extend the closing period in the Purchase and Sale Agreement of the acquisition. This method is preferred; however, the seller may demand an additional nonrefundable earnest money deposit.
2. Obtain an option to purchase on the replacement property. This option will later be assigned to the Qualified Intermediary prior to executing the option.
3. Negotiate a lease option. This alternative often solves the seller’s problem of servicing the debt until the property is closed. The lease payment provides cash flow to the Lessor.

In instances where the closing cannot be delayed, the most predominant re- verse exchange structure of “parking the replacement property” is used. This method avoids the “pure” reverse exchange, which involved owning both properties at the same time. The “pure” reverse exchange is never advisable, and majority opinion holds that it would be invalidated if audited.

In the “parking the replacement property” method, the Exchanger (party performing the exchange) cannot delay closing on the replacement property and a Qualified Intermediary (“QI”) is retained to perform the reverse exchange. The Exchanger loans the purchase money to the QI to purchase the replacement property.

The QI purchases the replacement property with these funds and holds title in its name. At the time of acquisition the QI leases the property back to the Exchanger through the NNN lease. Later when the relinquished property can be closed, the QI performs a typical exchange. Replacement property is deeded to the Exchanger by the QI. The relinquished property is transferred to the Buyer and the loan to QI (which was used to acquire the replacement property originally) is paid back to the Exchanger from the proceeds of the relinquished property received by the QI.

Most tax and legal advisors consider the reverse exchange as outlined above as not affected by the 45/180 day deadlines which apply to the typical delayed exchange. In a delayed exchange, the time-frame begins at the close of the relinquished property. This does not occur in the above scenario until the QI has closed on the relinquished property. In other words, the Exchanger receives the best of both worlds–an excellent acquisition today, and no time limits in which to sell the investment property. In addition, if there are multiple properties on the market, the Exchanger is not certain which property will sell first. This method allows flexibility regardless of which property sells first.

The main drawback occurs when the Exchanger, upon acquisition of the replacement property, desires to obtain conventional financing. Remember, the QI will take title to the replacement property and conventional lenders are less than thrilled to fund a loan to the Exchanger when the QI is the party on title. Guarantees by the Exchanger and other mechanisms to secure the financing can be used, but arguably taint the structure of the exchange.

Qualified Intermediaries have varying degrees of experience with reverse ex- changes and many do not facilitate them at all. Their opinion is that the risk is too substantial to warrant their involvement. Those QI’s which do offer reverse services typically do so only after certain prerequisites have been satisfied. For example, most QI’s will want to be listed as co-insured on the fire and liability insurance policies along with concrete verification that the property is free of toxic waste and/ or environmental hazards.

As the brief analysis indicates, any one desiring to perform a reverse ex- change should use the services of professionals with reverse transaction experience. This will minimize the risk of having the exchange invalidated or, worse yet, jeopardizing the asset. All investors should seek independent tax and/or legal counsel regarding a proposed reverse exchange since Qualified Intermediary companies cannot give tax or legal advice.

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