Take Advantage of Sales Leaseback Opportunities When Buying or Selling Commercial Real Estate

Businesses that have capital tied up in real estate, with a strong need to get at it, have an intriguing option open to them. Selling the property, and leasing the facility back from the new owner. It can create a mound of on-hand cash, and by making the lease terms long enough, and due to tax deductibility, the lease can amortize nicely over the life of the lease, while letting the business retire a bunch of debt. Particularly in cases where the business has an uncapped adjustable rate mortgage, or loan on existing equipment that's about to spike in its monthly payments, this is a good option to save money over the long haul.

In terms of cash flow processing, a sale to leaseback provides around 80% to 100% financing to the business owner doing the sale, for the purchaser, the property and the long term lease mean that there's a solid revenue stream coming in. (Depending on the local commercial real estate market, the sale/leaseback situation can multiply equity by up to 3 to 5 times, if business has grown around the area of your physical facility.) Make sure that any lease that's built is structured as an operating lease, rather than a capital lease. This helps the utilization of the lease agreement to remove long term and short term debt tied to the real estate in question, and removes the asset from the balance sheet.

It's this last asset that helps a lot of businesses; by removing the major asset "off the books", the business can show a higher return on its total assets, and can use its accumulated equity to fund expansions in its core (and more profitable) business. Right now, the market strongly favors sales/leaseback agreements from a sales point of view, in particular with businesses that rely heavily on liquid credit, that are feeling a crunch. This is making sales/leaseback arrangements much more appealing to businesses with lots of warehouse space, trying to turn product over for cash. It's also appealing to retail stores - any business that has to constantly reinvest in inventory can use a sales/leaseback aggressively, and often on better terms than taking out a loan secured by inventory, or against future invoices.

When doing the accounting to set up a sale-to-leaseback option, the purchase price of the building, less the net of any accumulated depreciation needs to be tallied up; a property purchased for $3 million 10 years ago may have depreciated to a net book value of considerably less - even if the current market price is significantly higher. When considering a sale/leaseback, the key characteristics are the equity/debt ratio, and return-on-assets ratio. Make sure you understand both of them before making this decision, and make sure you understand current market conditions.

Options As An Investor

In the current market conditions (where there are lots of investors, coupled with highly liquid money) a sales/leaseback arrangement can be a viable alternative to offering stock, or raising debt to fund expansion, and it strongly favors the seller.

If you're looking to invest in a sales/leaseback arrangement, there are some traditional favored properties, or triple net deals, where there's a single tenant who pays the real estate taxes and maintenance. Good example of this type of property is major retail and restaurant chains. These major retail stores and restaurant properties offer a traditional steady revenue stream, and they're usually located in good traffic hubs. They're easy to understand for most investors.

Unfortunately, these properties are becoming harder to find, and a successful investor needs to hunt a little further, looking into campgrounds and industrial buildings. These properties have a bit more risk - it's hard to predict how their performance will run over the next 10-20 years. It's important to do proper due diligence on these arrangements, but this is a market that's fairly easy to turn a profit on, if you can afford the typical $1 to $3 million for the payment terms.

When structuring a sales/leaseback agreement as an investor, you need to assess both how the debt market is going to change, and what the income potential of your tenant is. Use the standard cap rate formulas to determine how quickly your lease payments will recover your initial investment - and, in a market where good commercial turns are possible, don't be afraid to re-sell if you can.

Sales leaseback opportunities can be very advantageous to the seller and the commercial real estate investor. Consider putting this strategy in your tool belt to raise money for your business now by selling with a lease back agreement, or make a steady income as an investor, while reaping future rewards as "equity happens".

Blue Chip Real Estate

All real estate market participants, whether homeowners or investors, look at their purchases as an investment. Whether they feel it is the home of their dreams or a place that will generate a good rental income, property owners want to be able to sell it for more than they paid for. Preferably, for a lot more. It is next to impossible to be wrong in times of price appreciation, as markets all over North America have shown these past few years. During market expansions, buyers typically exhibit the 'King Midas Syndrome': like the famous mythological king, in fact, they all display that miraculous ability of being able to turn anything they touch into gold.

When markets hit a snag, however, property purchasers will have to be more selective about what they choose to buy. One segment of the real estate industry which is often overlooked by investors and yet is possibly the most lucrative, involves the purchase and sale of small free-standing professional office buildings. In the industry, we refer to it as 'Blue Chip Real Estate'. The definition is borrowed from the Stock Market, since Blue Chip Real Estate is the general description of interests in land that are well established, with stable earnings and no extensive liabilities - just like Blue Chip Stocks.

Small professional office buildings are typically leased to established professionals business entities such as proprietorships, partnerships, incorporated firms or any combination of the above, as well as to top tenants such as banks. They are valued by investors seeking safety and stability, though prices are usually high. Typically, Blue Chip real estate holdings are perceived to offer reliable returns, high yield and low risk. Additionally, most of them are strategically located adjacent to residential neighbourhoods, yet in commercially-zoned strips.

Small professional office buildings are sought after by a variety of professionals, especially in the medical industry, for the amenities they offer, which enhance their practice and professional images. For instance, many of these buildings are built with ancillary storage or utility space that can be used for a variety of reasons, provide rooftop or basement HVAC systems, or even nicely appointed consultation rooms in which clients and audiences will be more relaxed and potentially more receptive to presenters.

What makes small professional office buildings so particularly prized by investors is the fact that there is a shortage of them. As they offer more and better facilities, construction is typically more expensive than normal. The plus side of things is that market values of free-standing professional office buildings never fall, because there are not that many and they are always in high demand - specifically because tenants almost never leave.

In addition to generate highly reliable rental income, landlords usually take advantage of other important benefits, all of which are paid for by tenants.

Property Taxes and Utilities

Property taxes are typically higher than the norm but, as in all commercial tenancies, they are apportioned to and paid for by the individual tenants. Care must be exercised to be accurate in the measurements of common areas and passageways, so that a proper apportionment of property taxes can be made among tenants. In some instances, landlords are entitled to estimate the taxes payable for the subsequent calendar year, and to require tenants to pay the estimate in advance, provided that when the actual amount of taxes is known, tenants shall be invoiced by the Landlord.

Operating Costs

Operating Costs refer to the total of all expenses, costs and outlays of every nature incurred in the maintenance, repair, operation, insuring and management of the building all calculated in accordance with generally accepted accounting principles. Operating Costs include cleaning and janitorial, all utilities in the interior and exterior of the building, security, window cleaning, insurance required to be carried by the Landlord, repairs and replacements to the building, heating, cooling, ventilation and air conditioning if provided, outdoor maintenance including landscaping and snow removal, replacement of light bulbs and fixtures, telephone and other utilities, service contracts with independent contractors, supplies, legal or management fees and disbursements, federal sales tax on rent or similar taxes such as the Goods and Services Tax (in Canada), and all other expenses paid or payable in connection with the operation of the Premises and maintenance of the building.

Insurance

In addition to be responsible for payment of the pro-rata share of the landlord's insurance, tenants must carry their own comprehensive general public liability insurance (including bodily injury, death and property damage) on an occurrence basis, with respect to the business carried out in or from the premises and the tenant's use and occupancy thereof. Such insurance must contain a waiver by the insurer of subrogation against the landlord or shall include the landlord as a named insured, and shall protect the landlord in respect of claims by the tenants.

Furthermore, the tenant must carry insurance in respect of fire and other such perils covering the tenant's trade fixtures, furniture and the equipment, all leasehold improvements of the tenant and plate glass, and which insurance shall contain a waiver by the insurer of subrogation against the landlord or shall include the landlord as a named insured, and shall provide that any proceeds recoverable in the event of loss to leasehold improvements shall be payable to the landlord.

Leasehold Improvements

Unless stipulated otherwise, tenants bear all costs of alterations and improvements to the premises, and any and all such alterations and improvements, once completed, will become property of the landlord. Whereas free rent or free leasehold improvements are frequent in the leasing of average commercial, retail or industrial space, when it comes to small professional office buildings any such incentives or inducements to lease are unheard of.

The average size of this type of holdings is in the 10,000 to 15,000 square foot range, two or three stories in elevation and private, gated parking. As practically all expenses are paid for by tenants, capitalization rates are typically very high. The capitalization rate is the return an investor requires for investing in a property, so as to receive the annual flow of net operating income. Small free-standing professional office building have price tags ranging from CAD $1.5 million to CAD $2.5 million depending on the area, and cap rates as high as 20 percent per annum. Real property annual appreciation has been a steady 8 to 10 percent per annum over the past ten years. This means that a property that sells today for CAD $2 million would have sold for approximately CAD $750,000 in 1996.

Luigi Frascati

How Depreciation Increases the After-Tax Yields of Real Estate Investment Trusts (REITs)

Depreciation is a difficult subject in the area of cost accounting for commercial real estate.

Accountants do strive to make their financial statements accurate, and so they must recognize a fundamental principle of the universe that has troubled philosophers for tens of thousands of years. As George Harrison sang years ago, "All Things Must Pass."

There is nothing permanent in this three-dimensional world of space, time, matter and energy. Just as any Buddhist.

No building will last forever. Even the pyramids of Egypt will someday erode into dust.

Therefore, real estate property owners are allowed to deduct an expense from their gross income, called depreciation, on the theory that every year, the building is being worn down somewhat by the wear and tear of the universe. What physicists call entropy, according to The Third Law of Thermodynamics.

This depreciation expense is often calculated by dividing the total cost of the building by the number of years it's expected to have a useful life.

If you pay one million dollars for a building, and it's expected to last 10 years, that's a straight-line depreciation expense of $100,000 per year.

Notice that $100,000 in cash is not actually paid out of your pocket. Depreciation simply reflects the reality that sooner or later, that building won't be useful, and so the $1,000,000 you paid will be gone.

Although this is not practical, the ideal would be for you to pay someone $100,000 a year for ten years to build you a new, replacement building.

And when you take the depreciation expense, that is also deducted from the building's cost basis. So after 10 years, in the above example, that building is officially worth nothing, even though it may still be in great condition in a prosperous neighborhood. If it's well-maintained and in a good area, it can be useful for an indefinite period.

So one of the big problems is deciding what the useful life span of a commercial building is.

Of course, when we're talking about shopping malls, we're assuming their function is to lease space out to retail stores and restaurants, not to act as tourist attractions. So we can rule out multi-thousand year old spans such as represented by the Coliseum of Rome and the ruins of Angkor Wat -- which attract tourist money even though they've fallen down.

Yet even when we come down the level of commonplace apartment building and shopping strip centers, we just don't know for sure how long they'll last. Sure, there're castles in Europe hundreds of years old -- but also stone farm houses where farming families still live.

So it's entirely possible for a building in a good area to be bought or built, to have the depreciation expense taken on them . . . and 20 or 30 years later they're now worth far more than you originally paid.

So, in a long-term sense, depreciation reflects something real, but it's difficult to know just how much of an expense to take every year -- without a crystal ball.

For example New York City's Empire State Building is nearly 80 years old, but would be worth many millions if sold. The World Trade Center's useful life ended prematurely in a way that couldn't be predicted.

So when a Real Estate Investment Trust calculates its net income, it is required to apply Generally Accepted Accounting Principles. It will figure out its gross revenues, then subtract its operating expenses, then subtract a substantial figure representing depreciation on the buildings it owns -- even though they may in fact have appreciated in value.

Let's say XYZ REIT had gross revenues of $1,000,000 and operating expenses of $$700,000. That leaves $300,000. Then they deduct another $100,000 for depreciation. That leaves $200,000 as their net operating income.

The law requires them to pay at least 90% of this to their shareholders in the form of dividends. So they must mail out $200,000 X .90 = $180,000 to their investors.

But wait -- the $100,000 depreciation expense is a "book entry" only. That is, it's only on paper.

The $700,000 operating expenses represent cash that left the REIT's bank account to pay for salaries, repairs, and other necessary expenditures.

Depreciation does not represent a cash payment to anybody. That $100,000 is still sitting in their bank account.

So why not pay it out to their shareholders also?

That'd be $180,000 plus $100,000 = $280,000 available for dividends for shareholders, making them even happier.

Why not, indeed? That's what many of these companies do -- pay out more in dividends that the law requires.

And receiving some dividend payments that represent depreciation should make the shareholders even happier than usual. Here's why.

The percentage of the dividend checks they receive from real estate investment trusts that represents depreciation is not immediately taxable to shareholders.

Because it represents money that's available only because the company took a depreciation expense, according to the IRS it's officially a "return of capital," not income.

A return of capital is not taxable because it's not income. But it does reduce the cost basis of your REIT shares.

When is the only time you care about the cost basis of your shares of stock?

When you sell them.

If you don't sell them . . . you don't have to ever care.

Let's say you bought 100 shares of XYZ REIT for $10 each. Your cost basis is $1000.

In the first year got a dollar back for each share, of which 25 cents per share was for depreciation. Which means your cost basis is reduced by .25 X 100 = $25.00.

So your cost basis in those 100 shares is now $975 instead of $1000.

You do have to pay taxes on the dividends, but only on $75, not the full $100.

If next year you decide to sell the shares of stock for $11 each, you'd get a total of $1100. You'd owe capital gains taxes on $125 instead of $100.

In effect, you're now paying the taxes on that 25 cents per share depreciation in dividend checks you received the year before.

But let's say you're smarter than that. You don't sell your shares of XYZ. You just keep collecting the dividends for as long as you live.

When do you pay taxes on the depreciation percentage? Never.

The implications of this aren't widely known or understood. Even the best known REIT book writer, Ralph L. Block, doesn't mention this in his book INVESTING IN REITS until the first Appendix.

The percentage of dividend checks that represent return of capital because of depreciation varies from company to company, and can of course vary over time. Historically, it runs 25% to 30%.

The bottom line for real estate trust shareholders is that -- if they never sell their shares -- their effective, net after-tax yields are significantly higher than they think. The exact amount depends on their marginal tax rate.

Let's say that in the above example, your marginal tax rate is 35%.

You'll owe ordinary taxes of .35 X $75 = $26.25.

You received $100, and paid $26.25 in taxes, leaving you with an after-tax net of $73.75.

Your after-tax net yield on your shares is 7.375%.

If this was an ordinary dividend-paying company in some business besides real estate, you'd have to pay taxes on the entire $100 in dividends, for a total tax owed of $35. For a net of $65. For a net after-tax yield of 6.5%.

Therefore, to figure out the true net, after-tax yield of a REIT, you must multiply its stated yield by (one plus the depreciation percentage X your marginal tax rate).

Thus, in the above example, the apparently yield is 10%. (One dollar in dividends for ten dollars worth of stock).

.10 X (1 + ((.25 X .35)) =

.10 X 1.0875 = 10.875% net after tax yield

Purists would argue that you should use the new cost basis, but my argument is that it's irrelevant so long as you never sell the stock. In that case, your "practical" cost basis is what you originally paid for it.

So never sell it.

What types of commercial real estate, should you invest?

If it will, at commercial real estate investments, investors often know what type of real estate, you should invest in this article, about 5 groups of buildings and the reasons why you should or should not be considered.

1. Land: people who invest in waste places, often in the hope of buying farmland adjacent commercial land to a few thousand dollars per hectare. Dream of their fate is again in the near future for commercial value zonesHundreds of thousands of dollars or more per hectare. They often try to convince people to invest in undeveloped land, sell the dream. Even if this dream is really happening, as you can hit the jackpot in Las Vegas, the reality is, most investors lose money or get the return on the investment real estate. This is a very risky investment that generates no land or very little income. Regarding the taxes, the country is not so reduced that you can not claim any depreciation. Additionally, for theLand loan interest is also very stiff in comparison to other types of commercial real estate. So every month, you must pay the money for the mortgage to be found, while reaping none. Should invest in land which

- Develop expertise so that you can not convert the land treated in a shopping center.

- You know exactly what you are doing and their deep pockets.

- The ownership of the land of a shopping center, you (not the owner of the building).

2. Apartments: it is a management --intensive investments that the turnover rate is high. The leases are often short in one year from month to month. As a tenant in and out, you have to spend money to get ready for the device. Apartment tenants tend to be a history of delays in the other tenants have because they are more likely to have a limited budget. If you do not like dealing with a headache most of the tenants, you probably want to stay away from the apartments. The key to success is the apartment investmentto

- Control or reduce costs. This may appear a trivial task, the list of expenditures by the property manager. These expenses include: advertising, accounting, banking fees (because of insufficient funds), capital improvements, corner of Grant laundry, cleaning, costs of collection, garbage collection, insurance, il, Landscape Architecture Legal (expulsion) the cost, maintenance, asset management , Property Management Off-site On-site pest control, painting, repairs, sweeping, security,Property taxes, utilities and water.

- Investment in real estate only in a good position, no deferred maintenance.

- Stay away from areas where tenants, for example, Berkeley, Los Angeles.

Otherwise, you can finally afford a little money or even negative cash flow. If any of your investment goals is to be achieved high levels of cash flow to the fingers of the apartments. In California, if you have an apartment of 16 or more units have a manager on site. This increasesnew expenditures. In general, the apartments are easy to acquire and more difficult to sell. There are always many of them in each market. The apartments is that they tend to achieve high employment rates as everyone needs a roof over their heads. So the interest rate for apartments is usually ¼ - ½ per cent less than other commercial properties.

3. Special features: They are for a particular company, such as restaurants, gas stations andHotel / Motel.

- Restaurants: Some investors like to invest in fast-food brands such as Burger King, Pizza Hut, Jack in the Box, KFC. These are single-tenant properties with long-term absolute triple-net lease, which often have no responsibility for the management of the owner. However, the rental income or capitalization of these restaurants are located is often less than 5-7%. Emerging regional chain restaurants like Johnny Carino's, Backyard Burger, Zaxby or TiaSouthwestern tend to higher prices of the CAP in the range of 7-8.5% interest. However, if you do not return a deeper insight into the budget for a profit. Operators of restaurants for sale real estate investors a higher rate of CAP and lease back the property for 20 years. Turn off the proceeds of the transaction with the construction of the restaurant expanded. So if you are willing to accept higher risks, you will be rewarded for the high-income emerging market with these restaurants.

- Petrol station:When buying a gas station to both homes and gas stations to buy. Most gas stations have convenience stores and auto repair bays at times. The profit margin for gas is at 10-20 cents per gallon [fixed many customers mistakenly blame the high prices for gas station operators for the innocent], but is quite high for a store. This is required as a residential property that you are eligible for a loan stand-by with a minimum deposit of 10%. If youI was not the intention to participate in the management of the service station, auto repair and convenience, you can stay out as gas stations is a chemical that could contaminate the soil. Once a loss occurs and contaminates the environment, it takes years and cleaned a lot of money on the ground. You may also be responsible for damages by the owners of adjacent properties, such as the contamination in May spread to their property. It is almost impossible to sell your property, because the lenders do not wantBuyers borrowed money to buy it.

- Hotel / Motel: After buying a hotel / motel, a property and buy 24 hours a day, 365 days a year of its existence. This activity requires hard work and marketing capabilities to reach the various parts. The rooms are useless if they are free. Companies tend to seasonal and can be immediately affected by an economic downturn and political events, for Example 9-11. Many of these properties are owned by Indian surname Patel, as they seem to workdifficult and we know that.

4. Offices: These properties are single-or multi-storey buildings. The older of the two-story office building with no elevators tend to have difficulty in finding tenants on the upper floor, as a service-May disabled customers who can not climb stairs.

- Single-rent properties are used as the headquarters of large companies like Cisco. These tall buildings are usually sensitive toEconomy. Once free, it is difficult to find a replacement tenant.

- Multi-tenant building of these properties are leased by small businesses, for example, real estate, tax accounting. Investors who want to buy these properties in order to diversify their investment risk more widely. If a tenant terminates the drive, so a small percentage of the lost rental income.

- The tenant is of high quality: Most of them have good credit, very active and quickly pay the rent in arrears.

- Lease: The lease agreements for officeWorks range from full-service [landlords pay property tax, insurance, maintenance and utilities] on nnn [property taxes provide tenants] insurance, maintenance and utilities. The lease NNN is a litmus test of whether the office building located in a strong demand by tenants or not.

- Medical Buildings: These properties are leased primarily by doctors and dentists. A high-quality medical building should be in advance or in front of a hospital. This makes it easier for physicians toback and forth between the hospital and their offices. Some investors prefer medical tenant medical buildings are evidence of a recession.

5. Shopping / Rate Centers: These centers are usually on one floor and a number of varieties can tenants: space for the school and retail services, restaurants, doctors, and even the Church. Therefore, it is the most popular type of commercial property sought by investors. Are always asked a lot, because there are more buyers and fewSellers.

- Multi-Tenant Strip: The advantage of this investment, if a tenant goes, you lose only a fraction of total income while you are on the lookout for a new tenant. Then spread the risk for this object.

- Single-tenant building has the advantage that only with the tenant to work. Some tenants such as Costco, Home Deport, Walmart, CVS Pharmacy 10-20 to sign a one-year lease and could be the guarantee of their corporate assets, the billions of dollars.This makes your investment is very safe.

- The tenant is of high quality: Most of them have good credit, very active and quickly pay the rent in arrears. Often signs long-term leases of 5-30 years, so that we do not do to make the search for new tenants every year. Keep spending your property in good condition and even money to make it more attractive to attract customers in the shops.

- Triple Net (NNN) lease: lease shopping centers are often in favor of theOwner. Tenants pay a monthly fee and reimburse the landlord for the property tax, insurance, maintenance, and sometimes even the cost of property management for. This eliminates the risk much more like an investor. The lease is NNN is a kind of litmus paper to test whether the property is not in high demand by tenants or.

- Lease on the ground, sometimes even a shopping mall with a leasing land is for sale. If you buy this center, we have only improved, but not landbelow. Could a trophy property, but we think three times on investments. When the lease expires and the land owner refuses to renew the lease you do not! It is easy to buy the center, but very difficult to sell.

Use LLC for Real Estate Investments

It is generally advisable not to have your company to acquire real estate. If your company is a subsidiary of C, the company will pay the tax when property is sold. To obtain these benefits in hand, you have to pay a dividend. The dividend will be taxed again. In order to pay double taxes on profits from the sale of the building.

If the building of a tax loss that many buildings do so because the depreciation will offset the loss of tax revenue generated from business income.The corporate income tax, but sometimes it is taxed lower than individual rates. Therefore, the tax advantage for the building would be smaller if you play in a society of C.

Is the design of a tax profits earned, the earnings will be as part of corporate profits are taxed and taxed again as dividend income if the money distributed to the owners. Often, the property more money as taxable income will generate. In a C-Corporation, the money for homeowners is needed to increase the income taxwill not be paid if held individually.

The same principles apply to your rental property to provide your company. You will be taxed twice when they finally sell the property. Any services provided by the property tax may receive less than the interest rates are less commercial. The taxable income of the property will be taxed twice.

The analysis is different if you have a company, as a company of S C. However, there is always a good idea to own property in the SCorporation. If you change your mind in the future, and wants to make your property the company S, you are immediately below, depending on the market value of the property tax. For example: Suppose you want so much to a partnership for the development of property or for other reasons. Will not be able to gain ownership of the S Corporation without paying income tax too. Also, you can choose to receive a great advantage that estimates onLiabilities which may arise in your company.

The purchase of the building is not personally a good idea. Your personal assets would be at risk to meet possible liabilities arising from the operation of the plant. For this reason, many people use a holder of a limited liability company in real estate. You should always carry liability insurance. Be sure to discuss the liability issues with your attorney.

In addition to the protection of responsibility, a limited liability company(Company LLC) for maximum flexibility and maximum tax savings for property companies or property rental.

Real Estate Management Services Group

Investors in all types of rental property is a property management group to manage, market and get their investments. The group manages the details and a monthly survey of each property.

There are several important factors should investors seek the company of their choice. A group of Property Management should liability and compensation for all employees. Have a duty of loyalty? Questions you will see the proof of coverageInsurance and bonds. Farm Costs must be consistent with the management groups, without much variety. If not, why not inferior or superior? Reference checking the performance of the company and its employees.

The investor must ask how many years has the company been in business. Find all specializations of the group. They are mostly small condominiums and multifamily homes, or specialized in business or industrial property? Arediversified investment management residential and commercial buildings? What is their reputation in the industry? How do they manage the property? What system and software they use? It is customary? To use what kind of backup system of the computer?

The group of Real Estate Management is responsible for the increase in operating income investments, the value of the property and increase property value protection in the form of insurance, inspections and maintenance. ManyServices of the group are under contract to third parties.

The companies offer a variety of services depending on the needs of investors. Some basic services through a management group includes the following points.

Maintenance required. Will get to contract with suppliers and service property in good condition. You have to keep tenants happy and the building in good condition. They provide services for tenant issues, concerns andEmergencies.

You are responsible for collecting rents and other deposits and post office on a daily basis in the accounting software responsible. They are also responsible for evictions, providers of bill payment, services, and paying the mortgage.

The group of property management will be an annual and monthly financial report, which covers rent and control registers. You decide and recommend increases in rents and renovations.

The group controls allEmployees. The director will be appointed in charge of the buildings, land and buildings, fired and paid by the group.

The management team has the marketing of homes for rent as well. Create effective and creative marketing resources for the management of investment in advertising. Many groups of employees to manage, full of brochures, pamphlets, websites for local advertising.

Other services, a management group includes some of the following.They are typically offered in a separate fee.

You hire a leasing business through brokers. Development of a management plan, the district and regional analysis, financial and recommendations. They act as intermediaries for the sale of goods and monitoring of all projects will be significantly improved. Some groups offer advice.

A group of investors based on a real-estate management, to manage their investments. The investorManagement of the various groups of research before recruiting them. Certainly, they have a mutually beneficial cooperation that the rent will increase to protect property and to increase the property value.

How Depreciation Increases the after-tax returns of real estate investment trusts (REITs)

Depreciation is a difficult issue in its computation of the cost of real estate companies.

Accountants do not try to correct their financial statements, and you need a basic principle of the universe, which recognize troubled philosophers for thousands of years. As George Harrison sang years ago, "All Things Must Pass."

There is nothing permanent in this world in three dimensions of space, time, matter and energy. Like anyBuddhist.

N. Construction will continue forever. Even the pyramids in Egypt eventually undermine the dust.

Therefore the owners are entitled to their their gross income to deduct as depreciation, on the theory that every year, the building a little "worn by abrasion of the universe. What physicists call entropy, according to the third law of thermodynamics.

This impairment is often, by calculating the total costBuilding for the number of years, is expected to have a useful life.

If you pay one million U.S. dollars for a building, and it is expected that in the past 10 years, a straight-line depreciation of $ 100,000 per year.

Note that U.S. $ 100,000 not in cash, actually pay out of pocket. Amortization simply reflects the reality that sooner or later, this building is not useful, and thus the 1000000 dollars has been paid you off.

Although it is not practical, it would be ideal,You pay someone $ 100,000 per year for ten years to build a new building parts.

And if the depreciation that is deducted from the base cost of the building. So, after 10 years in the example above, this building is officially worth nothing, although it may still be in an ideal state in an affluent neighborhood. If she cared for properly and in good condition, can be useful for an indefinite period.

So one of the major problems is the determination of theLife expectancy of an office building.

Of course, when it comes to shopping, we assume that their function is to lease a space for shops and restaurants, not to act as tourist attractions. So we can rule out multi-span thousands of years, including the Colosseum and the ruins of Angkor Wat represent - that the tourists for money to win, even if they are successful.

But even if it drops to the level of construction and banalShopping centers, but do not know with certainty how long it takes. Of course there are castles in Europe are living hundreds of years - but also houses of stone farmhouse, where farming families still.

It is therefore quite possible that were prepared to buy a building in a nice neighborhood, or who have taken the burden of depreciation on them. . . and after 20 or 30 years are now worth much more than originally paid.

In a way, in the long run, reflects the amortization something real, but it is difficultexactly know how much effort to be made each year - without a crystal ball.

For example, New York is the Empire State Building nearly 80 years, but millions of euros would be different if sold. The useful life of the World Trade Center was stopped prematurely in a way that could not be predicted.

Thus, if a Real Estate Investment Trust calculates its net profit, you must apply generally accepted accounting principles. He determines the gross income, then subtract theOperating expenses, then subtract a number that represents the depreciation of the buildings they have - even if they have, in fact, a value obtained.

Suppose XYZ REIT had gross revenues of $ 1,000,000 and expenditures in the amount of 700,000 U.S. dollars. This is $ 300,000. While keeping 100,000 U.S. dollars for the depreciation. This leaves $ 200,000 that its operating revenues.

The law requires them to pay at least 90% of these assets to shareholders as a dividend. Thenmail must to 200,000 X $ 90 = $ 180,000 for investors.

But wait - the cost of depreciation of U.S. $ 100,000 is an entry for "book" only. In other words, it is only on paper.

The $ 700,000 in operational costs amount to money that the REIT account has left to pay salaries, repairs and other necessary expenses.

Depreciation is not a cash payment to third parties. The $ 100,000 is still sitting in their bank account.

So pay, why not to the shareholdersmuch?

The $ 180,000 plus $ 100,000 = 280,000 $ A provision for dividends for shareholders, they would be even happier.

Why not? This is to pay what many of these companies - from dividends, rather than the law requires.

And you get some payments of dividends, which may represent the depreciation of the stockholders, it even happier than usual. Why.

The control rate on dividends, which it is real estate investment trusts, which represents the impairmentNot immediately taxable to the shareholders.

Why is the money that is available because the company's costs in the amount of depreciation to the IRS officially a "return of capital," no income.

A return of capital is not passive, because it is not income. But it reduces the cost basis of your shares of REITs.

What is the time when you care about the cost basis of your shares?

If you sell them.

If you do not sell. . . notCare ever.

Suppose you have 100 shares of XYZ REIT for $ 10 each. Your cost basis is $ 1,000.

In the first year return on a dollar for each share, 25 cents per share, the depreciation. This means that the cost is reduced from, 25 x 100 = $ 25.00.

So your cost basis of these 100 shares is now $ 975 instead of $ 1000

You have to pay taxes on dividends, but only $ 75, not the total amount of 100

If next year you will decide to sell the shares at $ 11each, you get a total of $ 1100 You have capital gains tax on $ 125 instead of $ 100.

In fact, now pay taxes, 25 cents per share dividend from the depreciation of checks that the past year.

But to say that you are smarter than that. Do you sell your shares of XYZ. Dividends, as long as you continue to live, to obtain.

If you do not pay taxes on the deposition? Ever.

The impact of this little-known orunderstood. Even the well-known book writer REITs, Ralph L. Block does not mention in his book, "Investing in REITs until the first plant.

The control rate of dividend represents a return of capital because of depreciation differs from company to company, and of course, vary over time. Historically, runs 25% to 30%.

The bottom line is for the shareholders of the estate of the confidence that - well, they never sell their shares - their effectiveness, the net return after taxthan they think. The exact amount depends on the marginal tax rates.

Say the above example is the marginal tax rate of 35%.

Enter the ordinary income of 35 x $ 75 = $ 26.25.

You will receive $ 100 and paid $ 26.25 in taxes, so that a net after-tax $ 73.75.

Your network is after tax on your shares 7.375%.

If there is to pay an ordinary dividend in any commercial enterprise outside the property, you have to pay taxes on $ 100 in allDividends, for a total amount of tax due of $ 35. For a net-65 U.S. dollars. A network of after-tax of 6.5%.

So is the true net after tax returns of a REIT to be calculated, it is necessary to multiply the benefits of (one plus the removal of X given marginal tax rate) to.

Thus in the example above, the yield 10%, apparently. (One dollar in dividends for ten dollars) in the camp.

, 10 X (1 + ((.25 X .35)) =

, 10 x 1.0875 = 10.875% net after tax

Purists sayYou need is the cost method again, but my argument is that it does not matter as long as you never sell the shares. In this case, your "practice" approach that costs reimbursed.

So do not sell forever.

Real Estate Management Software for the convenience

Software for property management is a good friend of property managers and owners of these objects. This software supports various files and data to be preserved for use by the owner and property management. There is a general software that serves the goal of almost all types of buildings and their management. For more skilled jobs, it is a software and there's more specialization and exclusivityspecially developed software, which is a specific client.

A very obvious question that should be in this case, what makes this software. The answer is to develop and say a word, we can say that almost all of the things that pen and paper and need more. The foundations, which makes the property management software, managing leases and rents and other monetary problems. Some of the traces of a simple program, the dates of the lease or renewal and allows the export of such dataComputer platforms and other software for the analysis. The software works normally as a reminder calendar and a database of important dates and also generates reminders when needed.

Software for Real Estate Management encompasses the entire process of managing real estate. The software contains a database of tenants and all things at the time of employment, expiration of the lease relating to the rent and security deposit and the same number ofOnce the tenant default. Accounting of all income in the form of pension is maintained and that the tenant receives a copy of the Declaration on the rent paid by him. This helps to maintain the transparency of the system and allows the tenant incurred the costs during the period for which rent and other costs sought. These days are the rents by the liquidator of the Bank and the software used to generate a monitoring of these statements contain a summary of the paidTotal sales.

Software for real estate and property care and maintenance, both short and long term, it is a very important part of management. The software includes a database of suppliers and their specialties. As soon as they are necessary, details can be retrieved from the database. Details, such as the nature of the complaint, the time for the repair or service, the employment relationship, the payment for the fracture and restorationReport on the quality of services are readily accessible from this database. These reports help to monitor the performance of the property and to require the identification of areas requiring immediate attention.

Software for property management is also specific to residential and commercial properties, but the software functions for each type of structure is also common. The software for the management of residential homes, there is a special softwarefor certain purposes, such as management software house, apartment management software, etc. Some of the software contains all the modules that are used by residents and property owners for various applications and also the calculation of taxes, which are often made very complicated for the common man for one of these programs can use a single supplier or surf the Internet to communicate get to meet a satisfactory solution for the needs.

With professional Trends Commercial Real Estate Management

Always cut the cord and the release of the rope connecting them their office or cube. Whether it is WiFi, PDA or just a normal phone, the way we work to change this. So, what's hot and not allowed to ask?

Well, it is surprising that they know wireless is definitely hot with cell phones are still an important tool for businesses. Mobile communication devices can perform the critical task when and where they want. Both areas are growingBusiness applications where mobility is a general duty and business tools for executives on the move.

Mobility is an essential function of management, such as work orders more efficiently, because most jobs to be created in this function outside the office. Managers are always on the road, and there are some basic applications such as mobile e-mail will continue to gain momentum and popularity. In terms of business solutions for real estate, the most commonly used software and technologyApplications include:

Receivable / payable
Work Order Processing
Property Management
Bail AdministrationThis shows that the integration of real estate companies are technology applications in areas that traditionally broad consensus among the various sectors such as accounting and processing work orders and are also beginning to the latest solutions specifically designed for commercial applications, such as developed, adopted Property Management and leasingSoftware. Intranet sites and software solutions for managing contact are very popular for professionals in the real estate industry.

What is surprising is that in a recent study by Building Owners and Managers Association International, more than 50% of office buildings do not have a website. This is surprising, since most companies do not sell now, sell, manage and maintain the customer with a website. So why the housing market so far back? Studysuggests that there is still a technology of great gaps in knowledge in the sector of commercial real estate, and there is a real need for more education in the economy.

Take advantage of sales opportunities to buy the lease back or sell Commercial Real Estate

Companies who invest in real estate bound to go with a great need to work, have an interesting option is available. Sell property and lease back new owner of the property. E 'can create a lot of money on hand and make the rental terms for long enough, and the tax deductibility, the lease be amortized over the lease term, while, companies that derive a lot of debt. Particularly in cases in which the companyachieve limited variable rate mortgages or loans in the amount of existing facilities at the summit in their monthly payments, it is a good option for long-term savings.

In terms of managing cash flow, sales and rental offers about 80% to 100% financing to owners of businesses in the sale to a good and long-term lease commitment means that a stream of revenue from the inside (depending on the local commercial real estate market, the sales / rentalSituation is the capital, up to 3 to 5 times, if the company has grown around the area to ensure the physical plant.) That any lease agreement that is being built is not structured as a lease as a lease. It helps to remove the lease use to long-term and short-term debt in the real estate related question, and removes the household.

This last advantage that helps many businesses,Removal of the major pluses of the books, the company can demonstrate a better return on total assets, and can use their own resources to finance the expansion in their core business (and profitable) business. Currently, the market is taking strong distribution partnerships, and promotes sale-leaseback to leave especially with businesses that rely heavily on credit for cash, they feel closer. These sales / terms of sale and lease more attractive for companies with lots of storage space,try to make products more money. Also resellers - a company can reinvest in inventory aggressive sales / rental use, and often cheaper than a loan of stock, or secured against future bills continued.

From the accounts should pursue a sale price of the option of leasing the building, without the deduction of accumulated depreciation are recorded in the city, bought property 3 million to U.S. $ 10Years, were, at a net book value is much less downgraded - even if the current market price is much higher. In considering a sale / lease, are the main features of the equity / debt ratio and return on assets ratio. Make sure you understand both before that decision, and make sure you understand the current market conditions.

Options as an investor

In today's market (where there are many investors, combined with veryCash) sale / agreement of sale-leaseback can increase an alternative to the offer document or debt to fund expansion, and strongly favors the seller.

When you invest in a sales / rental sales, there are some features of traditional favorites, special offers or Triple-Net, where a tenant, property tax and maintenance pays off. Good example of this type of property is the retail and restaurant chains. These large retail and restaurantProperty offers a steady stream of traditional recipes and are generally well located in the shopping traffic. They are easy to understand for most investors.

Unfortunately, these properties are increasingly difficult to find, and a successful investor must have a little 'later drive, looking at camping sites and industrial buildings. These properties have a little more risk - it is difficult to predict how their performance will place in the next 10 -20 years to take advantage. It is important that sufficient time of the appropriate actAgreements, but is a market that is relatively easy to make a profit, if you're the type of $ 1 to $ 3 million dollars can make the conditions for payment.

In structuring the sale / lease-sale as an investor, you must determine how the two debt market will change, and that the potential income from your tenants. Using the standard formulas of the CAP in order to determine how quickly the lease payments to recover the initial investment - and in a market where good business towersare possible, you do not sell fear, if possible.

Leasing and sales opportunities can be very profitable for the seller and Commercial Real Estate Investors. Consider this strategy into a tool belt to raise money for your business now up for sale back agreement with a leasing or create a regular income as an investor, while the harvest to come, "what has happened justice."

5 Children franchise opportunities, the Keep Fit Kids

Between diet and lifestyle changes in the last 50 years, America has a very unhealthy and overweight. When people and public services address this problem, generally noted that almost one third of Americans are overweight and that obesity is one of the deadliest killer in the United States. What we do not sometimes say that an estimated 16% of children are overweight, about 70% of these children grow and remain obese and one in 15 children are so bad todayneed medical intervention such as gastric bypass to recover from their condition.

Although it may seem at first independent, was an interesting impact on the business. In the same way that the weight problem in America (and the sudden awareness of the company) over him fast start encouraging food that has to offer healthy alternatives to the standard menu options, new awareness of the health of the country how we changed the children, even in the business of franchising.Our most recent concern is the ability of children. If you have a talent for working with children and a passion for a healthy life, then there are opportunities for you, and now some of them.

Fitwize 4 Kids

The first of its kind, Fitwize 4 Kids is essentially a mini-gym, circuit training, the needs of the body of a child aged 6 ½ to 15 in a series of meetings quick 45-minute training meets to be effective fun. But her work with childrenStop cardiovascular training, strength training, flexibility and training, and focus on nutrition. In the hope that all that have a lasting impact not only the body but the mind, the ultimate goal of the company promotes a sense of the value of each child as a person. With regard to reports that regard the company is a relatively low ceiling, because the drawings are as compact as possible, using every inch of space is, and professionals tend to take many years, so that the cash flowfirm.

Pro Martial Arts

If this is used not only for children who tend to represent the majority of customers in a study of the martial arts. This franchise opportunity is the ideal opportunity to build an $ 19bil industry excluding the operation of a traditional weight lifting and aerobic gym, like everyone else. There is nothing wrong with that, no prior experience in teaching karate grandmaster Samanė or execution of a study, since the franchisor can and will teacheverything you need to know. Design and layout, marketing, operations, teacher recruitment and development of web pages are included in the package of the franchise, so that each member must bring to the table is a passion for martial arts is to be successful in business, and a sincere desire to see people grow in physical fitness and confidence.

Children's Dance

Your own words, they are dancing "original development, motor skills, gymnastics, music, and a fitness programmixed with scientists and specifically designed for boys and girls aged 2 to 12 "What looks like a very different franchise to another. With four different companies leeway (bronze, silver, gold and gold), affiliates of home, many possibilities of how to run their activities. Each work contains a different number of classes in to teach the week, and according to the wishes of the franchisee, which can be taughtor rented by the dealer himself or by a teacher. The startup costs are very low because the costs are general, because there is no studio to rent out.

Monkey Joe's

The most important question that children exercise is to find a way to mock the year, and no one is better than Monkey Joe. Designed as centers of activity for children, these licenses give children an excellent way to television, video games and movies that have invaded their lives soplayful and physically active for a period and took a part of the unlimited energy childhood. And while the children play safely on a wide range of domestic tire bounce equipment to monitor training and loving with the children, the children, Mom and Dad do not have time designated in the parents room watching TV, surfing the internet, or relax to sleep. It is a great opportunity for the whole family and an even greater franchisee for the talent with a heart for children.

Full TimeSports Camp

When you see the sport as a realm of possibility, children teach life lessons and develop the character, then you are in line with the objective of Skyhawks Sports Camp. With 29 years of education in the field of athletics in the country at a summer camp, the company has one of the best ways to develop one of which is franchising. Affiliate work from home and spend most of their campaign and their camps in order to bring more customers, such as the Summerrolls around. The franchisor provides the franchisee with a job to bring home with the tools to run and stay in operation, including sales training, technical support for Web-based software, accounting, marketing, and more.

For employers, to help children achieve a high level of fitness and a greater sense of personal worth are interested, there is no new franchise business opportunities that better health of children. Weight and poor health are the mainProblems in our society, but if the next generation is learning to live healthier, could change the trend when they are adults.

Real Estate Financing - Get The Facts First Before You Commit To A Home Mortgage

Be sure to take into account all your monthly obligations such as car payments, credit cards, personal loan payments or student loan payments, etc., when they find out you are just what you can afford each month to pay for a House buying can. Because the real estate market continues to expand and gain new technologies on the ground, widely accepted beliefs that may be even a few months ago but not be true today. You do not want to jump blindly into something, or signed real estate contract or homeMortgage loan contract or any type of contract, without understanding fully what you are committing.

Whenever the economy is thriving, inflation, interest rates will send the top lead. When financing real estate it is important to know that a low FICO credit score does not mean that you do not qualify for a home loan or a mortgage at home. There are many opportunities for those who are a couple of bad credit marks on your credit report. Search for the best loan program for yourmust depend on a number of factors, including: How long will you be back home, how much money you put down and how to keep you finance the closing costs.

Used an adjustable mortgage, the best choice for homeowners who had planned their first house to buy and are planned in the property for three to five years and who relocate at this time. But many people ended up in foreclosure if the subprime lenders started their doors or go bankrupt. Iwould be very cautious and would be thought about, before an ARM will.

Some lenders may set limits to how much of your down payment can come from borrowing from external sources. Is not a loan application approved for the first time, he can always be re-submitted after a few changes such as increasing the amount of the deposit.

You want an estimate of your home mortgage or real estate closing costs by the lender you think you want to get with. Andif the lender receives the application of law, the lender is obliged to deliver his statement to you within three days.

You can check with your CPA or Accounting Professional, you may be able to pay interest on the mortgage loan and part of the financing costs of the house, as the points get deducted on your tax return. Insiders know that the advertised mortgage rates you find are not always what you get from the lender market fluctuations, economic news, ormany other reasons can affect the interest rates in the course of the day.

If you have any problem getting a loan or a mortgage at home, you may want to consider a lease-purchase agreement. A lease-option on the property allows you to make a good purchase price now set, and then use a portion of the rent per month to your eventual down payment, building up equity in the process.
They will more than likely get a conventional loan with a fixed rate mortgage. A standardThe mortgage is the interest and principal payments for the duration of the loan. The property tax is about to change though. It may be a choice as to whether the taxes in your monthly or yearly payment on your own. For a 80% loan, you will probably have a choice. For variable-rate mortgage, the initial interest is usually lower than a fixed-rate mortgage and the monthly payment would be lower, but it has many associated risks. You canqualify for an FHA or VA mortgage, ask your lender.

In summary, you have to feel comfortable with the amount of the monthly payment on your house or other real estate. Take your time, study all the available resources, home mortgage, online and offline and get lots of advice from several mortgage brokers, real estate brokers and other real estate professionals, before going to do a real estate financing, refinancing or investing.

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