These changing times can mean a shift in investment priorities - especially in commercial real estate. Whether your portfolio includes commercial properties, or you are just planning to become an investor, now is a good point to examine how these assets can reap the best rewards.
Despite the recent sub-prime lending troubles, properties in the New York region are still coveted - welcome news for both current and would-be investors, especially those eager to secure a new level of revenue stream.
For this reason, baby boomers nearing retirement, in particular, should carefully look at their real estate holdings to see how these properties are working for them both now, and in the future, as they wind down their careers.
Those navigating the current real estate market may now face a myriad of new priorities and challenges. New York City property owners, for instance, may find that they are less frequently in the city, and prefer instead to purchase a building in Nassau or Suffolk; most of these owners, however, are very concerned - and rightfully so - about any consequential capital gains tax. Others say they are struggling for viable tenants at a time when retailers vie for market share in a landscape filled with big box stores and online shopping alternatives.
The good news is that investors have many options available to them. For example, owners seeking to sell their city properties in favor of buildings in the suburban market should look into what is called a 1031 exchange. The 1031 exchange is a transaction that permits the sale of one property with a like-kind investment property, deferring the seller's profit to a later date. This transaction enables sellers to own properties that better suit their needs.
There is good news as well for those who own under-performing retail properties. In some instances, property owners are able to change their retail space into residential buildings. At a time when affordable housing is scarce, converting retail space into apartments may be a welcome solution in your community.
Meanwhile, commercial properties are now sought after by a new kind of investor: physicians. Squeezed by the HMOs and the high cost of malpractice insurance, physicians are currently purchasing professional buildings, not just to house their own practice, but to lease out as well. Many physicians who already own commercial properties are substantially renovating them so that they can entice the better tenant.
With the right strategy, and proper guidance, your commercial properties can continue to play an important role in your investment portfolio.
Joseph Milizio is a partner in the business & real estate practice group at Capell Vishnick, Lake Success, N.Y. Tags: