Commercial Section

[Raymond509]

Hi Jaffman -- thanks for replying --

The building is in good shape and there is this nice 5 year renter -- trouble is I can't figure out how I make money.  I break even.  By the time I might cashflow, the lease is over -- I've got to pray he re-signs.  

[Jaffman]

Is the contract ratified already?

[Raymond509]

yes

[Jaffman]

What attracted you to the deal other than "the fact that there is a nice 5 year tennent attached to this thing" ?
What happens if the tenant business terminates before the end of the term? Its great that you are getting into commercial leasing but again, you want those deals where there are multiple tenants to help offset vacancies and ideally, a guarantee that the lease payments will be paid to term. I dont see how you could make this work to your financial benefit. Perhaps someone else has other ideas.
On a positive note, daycare is a sure thing in my area and something I would consider because of the demand. Hopefully its the same in yours and my wish for you is that the tenant will prosper and extend the lease.
Give me your email so we could keep in touch. I'd like to feed off your experience.

[Keith Palmer]

Jeff,

You seem to be the man here.  :D I appreciate your answers, you offer very good advice.

I also handle commercial financing and I am located in Florida. Feel free to send me an email with your questions or scenarios.

[costsegspecialist]

For those who own commercial property, there is a rather new tax strategy called Cost Segregation Analysis or Building Component Analysis.  The IRS requires an engineering approach to determine the benefits for a cost segregation study.  You probably have not heard of this because most CPA firms do not have an engineering department or understand the complexities of breaking down a buildings components within a commercial property.  Fortune 500 companies have used this analysis for years, but because of recent court cases the small commercial  property investor can take advantage of these new court cases.  In short, most commercial property owners depreciate their building using the straight line method of 39 years.  A building component analysis re-classifies the components in the building to shorter depreciation lives of 5, 7 & 15 years, which accelerates the depreciation and increases cash flow for other products.  

Another benefit for owners of commercial property is that if you have owned the building for, as an example, 7 years, the IRS allows you to catch up on your depreciation from those past 7 years and apply all of that catch up in the year you change your accounting method.  The majority of commercial property owners can see a minimum of hundreds of thousands of dollars in tax benefits by using this analysis.  

If you have any questions regarding this new tax strategy, please do not hesitate to ask questions and I will do my best to answer them.  If you are an active investor or own a commercial property, you can definitely benefit from a cost segregation analysis.  

Rudy
Commercial Property Consultants