This posting originally appeared on Patrick’s Active Rain Blog on March 3rd at 11:26.
Although I am looking at this from a commercial standpoint, I have to imagine that this certainly applies to residential real estate as well, where many markets have come off even more than the commercial markets.
Over the past several weeks I have talked to a lot of clients and potential clients about their needs. Most of these people are looking to lease, but I always ask them if they might consider a purchase, especially if it might be possible to get a multi-tenant building/property.
Case in point is a client looking for some land or industrial space to operate a specialized auotmotive sales business. He needs a particular zoning, a small office, and some yard area. He also needs signage, and prefers to be along a major thoroughfare. He has a budget in mind, and there are definitely properties that fit the bill. So I pitched him a property that is currently leased up, but there is an opportunity to use some additional space on the property for his business.
With 20% down, at current rates, he would actually produce positive cash flow and have a space for his business. If you have the cash to put down on the property, this is like hitting the jackpot!
Let’s face it, rates are at historic lows, and property values have declined. Granted, property values will likely to continue to decline (especially commercial values and especially in Austin, as both of these markets haven’t faced a major decline to this point, so some devaluation seems inevitible). Even if they do, if you can build equity in a property, generate cash flow, and avoid paying rent for your own business, why wouldn’t you explore this option?
For real estate agents, if you have thought about this for a particular client, give it a look and see if it might make sense for them.
For potential lessors, consider whether or not a purchase makes sense for you right now. It may not only save you money in the near term, but allow you to invest in a market that will likely appreciate in the years to come. Not to mention the tax benefits of owning property.
Finally, you’re helping out the economy, do your PATRIOTIC duty!
Just my two cents from my (limited) view down here in the trenches.