THE PRICE IS ETCHED IN STONE BUT THE MORTGAGE ISN’T…

THE PRICE IS ETCHED IN STONE BUT THE MORTGAGE ISN’T…

The price or cost of commercial real estate is etched in stone forever but the financing, the mortgage, can be adjusted again and again and again. You see, you buy now with the prices low and the interest rates high which will cause a higher payment. As long as you have reserves backing you, you can make the higher monthly payments with the higher interest rates.

And you can never forget that since we are talking about COMMERCIAL real estate there will be income from rentals, of some type, that will be there to use to help make the mortgage payments until the interest rates come down and the payments come down as long as you keep refinancing your loan. Years ago, the borrower had to pay points, a small fortune, to refinance their loans every time but things are different now. Almost all loans or mortgages charge no points up front so you can refinance as many times as you want, and it costs you nothing. You just need the reserves or the income or the wherewithal to make the mortgage payments until the interest rates come down and the payments become reasonable once again.

So, in the end, you end up with a good piece of commercial real estate bringing good rental income to you at the right price and a loan that has a reasonable interest rate and you’ve got one of the three things that we love to have in commercial real estate, CASH FLOW!!! The other two things are appreciation and income tax benefits. Well, as the interest rates come down, which they have to before the 2024 presidential elections, the prices of commercial real estate will go up yielding appreciation and I can guarantee you wonderful income tax benefits as I am probably the only commercial realtor in the United States with over 50 years’ experience as a practicing Certified Public Accountant who still keeps up on the latest income tax laws.

The bottom line is that it’s a great time to buy commercial real estate if you can carry the mortgage until you can refinance it maybe two or three times and get the interest rate and the payment that you want and that makes sense. And never forget about those income tax benefits that my partner, Fred Sams, and I can get for you through Cost Segregation Studies and Bonus Depreciation. Also, you have to remember that Bonus Depreciation is going away 20% per year until 2027 when it is supposed to hit ZERO. But, as I have said many times here, the government, CONGRESS, will have to replace Bonus Depreciation with something similar or the commercial real estate market will dry up and possibly cause a recession.

And my final point is not to be too smart and think that you know when the interest rates will be at their highest and the prices of real estate will be at their lowest. Accept the situation as it is now, or you may just outsmart yourselves and end up with nothing!!!