YOU PURCHASE REAL ESTATE FOR THE APPRECIATION…

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PART VIII…

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When it comes to appreciation, I have one last topic to share. I like to build mixed-use properties with some special retail tenants on the ground floor, maybe parking on the next couple of floors, and then apartments above the parking. The retail stores should consist of a good, no, excellent ethnic restaurant like Indian food or Italian food, some specialty stores like a fine men's or ladies’ clothing store, and a couple of other stores that will bring foot traffic to the building.

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The foot traffic will ensure that if there is a vacancy in the building, a sign at the entrance of the residence part of the building should fill the vacancy pretty quickly. Also, the rents for the retail stores will be higher per square foot than the apartments, promising high returns on your investment.

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The stores on the ground floor will also help your property stand out in the neighborhood.? Everyone has an apartment building, but making this property unique with the retail stores will make it the trendsetter in the neighborhood.? Everyone and their friend owns apartment buildings, and as the neighborhood matures, your apartment building will appreciate.? But wouldn’t it be nice if your property was the one that set the tone for the neighborhood maturing?? As the neighborhood matures, you will be raising the rent, which is an important factor in valuing a piece of commercial real estate.? As you raise the rents, the Net Operating Income of your property will increase, and the Net Operating Income divided by the Capitalization Rate determines the value of the property.

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Also, the Capitalization rate will go down, raising the value of your property. So, if you have that mixed-use property and are the best property in the neighborhood, you and no one else will be the major factor in the neighborhood maturing, setting the rents, and decreasing the Capitalization Rate for your property.? And, I do not know about you, but if I can control my destiny, I am happy.? If I just wanted to go with the masses, I would buy a fractional share in a real estate syndication and get what we call mailbox money.

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This is the last article about appreciation.? Tomorrow we will begin the journey that so many of you have a real interest in, getting income tax benefits when purchasing commercial real estate.? Have a wonderful day!!! ?