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The Essential Guide to Hiring a Real Estate Broker

If you have currently made the decision to invest in commercial real estate for the first time, diversify your investments, undergo a commercial lease renewal or find a new location for your business, you will need the services of a commercial real estate broker. Why? Generally speaking, the many advantages provided by a commercial real estate broker can help ensure you are protected as your deal proceeds.

Many people aren’t aware of how much more advantageous it is to leverage a real estate broker for such important transactions. Whether you’ve never used a real estate broker before or are looking for a better fit for your situation, finding the right person takes a bit of research. Fortunately, this guide to hiring a real estate broker will further highlight the distinct advantages offered by commercial real estate brokers as well as outline several important considerations you should make while hiring.

What Is a Real Estate Broker?

To successfully begin the hiring process, it is essential to realize what, exactly, a real estate broker does and what sets a broker apart from other real estate professionals. While all real estate professionals, including agents, consultants, associates, realtors, and brokers, can sell real estate, brokers have a distinct advantage over the others.

Most brokers have more training than a realtor or agent. They are also typically held to a higher knowledge standard. In most cases, a broker must take college-level coursework and hold either a bachelor’s or higher degree or have at least two years of real estate experience before completing the certification requirements. Most often, brokers work as independent agents and may have agents working for them.

Why Use a Broker?

For business owners used to negotiating their own deals, hiring a broker can seem unnecessary. At the beginning of a search for commercial property, many people are tempted to undergo the process on their own, but that is usually not in their best interests – and it doesn’t help financially. Tenant and Buyer representation is at no cost to the client; it’s paid through the commission of the lease/sale from the seller.

While it is true that some professionals manage to complete the buying process alone, they’ve done just that – they’ve accomplished the process but are likely missing out on real advantages. Commercial real estate brokers offer a wealth of advantages to clients that aren’t easily undertaken by a busy business owner with multiple other responsibilities.

Primarily, commercial brokers are more effective because they’re accustomed to performing legal real estate negotiations and navigating jargon-filled contract and lease documents, ensuring your negotiations will be handled correctly and in a timely manner without taking away from your other responsibilities. Their vast breadth of knowledge regarding the local markets, as well as local zoning procedures, can help you maximize your profits and alert you to findings the average professional is not aware of. In addition, even brokerage fees are often split with the listing party, minimizing your expense.

How to Find a Broker

Once you’ve decided to use the services of a commercial real estate broker, you’ll need to locate candidates for the job. In most markets, there are two primary ways to do this:

Referrals from Former Clients

Utilize your contacts and find associates who have been satisfied with their broker. Ask which aspects of working with this broker they were happy with, as well as things they may change about the experience. Strengths and weaknesses can vary from a client’s perspective, so don’t be afraid to get multiple opinions. Ultimately, you’ll want to know whether they would work with the same broker again.

Online Reviews and Resources

As with any other service, brokers are subject to a wealth of reviews and critiques online. You can find reviews on multiple online real estate sites like LoopNet, but the gold standard for reviews is often Google itself. Read as many as possible, both positive and negative, and build an overview based on the average.

What to Look for in a Broker

If, during your search for broker candidates, you’ve found one or more potential professionals you like, the next step is determining their qualifications. While all brokers in the state must meet the same minimum qualifications, you’ll need to ensure the broker will meet the needs specific to your unique situation. Look for the following:

A Broker in Your Niche

Your property needs are unique depending on the sector of business you occupy. Ideally, a broker with expertise in your asset type will be able to provide personalized insight into the market, identify the buildings that best meet your needs, and come equipped with knowledge regarding the zoning, licensing, fees, and other specifics of the purchase. Moving forward, a broker in your niche can continue to aid with future purchases.

An Expert in the Target Area

Similar to a niche expert, a broker who is an expert in your target market should have a depth of knowledge regarding laws, resources, restrictions, zoning, and proposed developments an outsider would not. In addition, area experts should property lists readily available for your perusal, drastically reducing the time necessary for your new property search.

Superior Communication

Communication is essential for any real estate broker. Do they return phone calls or emails in a timely manner? Did they take the time to discuss your needs, wants, must-haves, and other aspects of your search? Most importantly, does your broker follow through as promised?

A Well-Connected Professional

When you’re searching for a real estate broker, you need a full-time, experienced professional who makes commercial real estate their business. Such professionals are usually well-connected in the area as well as within your niche, which will likely afford you the opportunity to begin building other essential relationships within the community. These relationships have the potential to lead to additional investment opportunities, business networking connections, and more.

Getting Started in Commercial Real Estate

Finding an individual you believe to be your ideal real estate broker is only part of the battle; now, you’ll need to set up a telephone or in-person meeting to ensure the relationship works for both of you and solidify your agreement. If both broker and client are on the same page, the relationship can begin positively.

Begin by telling your broker crucial information about the properties in which you are looking to invest. Be sure to specify the asset type, class of properties, classification of properties, desired area, and ideal price range. It is at this point that your broker has the opportunity to demonstrate the expertise and communication skills you identified in the steps above. A professional real estate broker who is an expert in your niche as well as in your target area should return communication fairly quickly, as the bulk of the current listings should be accessible as needed. Your broker should have an information-rich list of properties that may meet your needs and be willing to discuss negotiation techniques, fees, commissions, and the presence or absence of in-house services to help bring your project to completion.

If the initial consultation went well and you’ve established a relationship with your broker, you’re well on your way to a commercial property deal. As the deal proceeds, good communication, transparency of all fees and policies, and other fair-practice behaviors should remain in place, protecting you and your assets along the way. Finally, always remember to treat your real estate broker as a professional whose time and expertise truly matters to your bottom line; if the broker meets all the qualifications and criteria listed above and treats you well in return, you’re bound to have a business relationship that will benefit you both for years to come.

COBE is THE Trusted Brokerage for Commercial Real Estate in Phoenix

If you’re looking to buy commercial real estate property in or near the Phoenix area, it’s time to consult with a broker you can trust. COBE’s commercial real estate broker team can help you finalize the ideal transaction to meet your needs.

With over 50 years of combined experience and $500 million of combined real estate volume, we’re confident we are the right solution for your commercial real estate needs.

Request a Consultation by Phone at 480-610-2400 or Contact Us Online Today.

Real Estate Investors Filing Taxes Overlook These Changes in Tax Code

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In the business world, the rearview mirror is always clearer than the windshield.

– Warren Buffett

Hindsight may be 20/20 but for real estate property owners and investors, it isn’t good enough. If you’re listening to the chatter on social media and many news sources, the verdict on the new tax laws isn’t all that rosy. Is it based on reality or confusion surrounding the Tax Cuts and Jobs Act (TCJA)? We thought we’d talk to a local expert on taxes and how they affect real estate rental owners to help disseminate between the muck, the money, and the best ways to maneuver around the melodrama. Jennifer Johnson, owner of Perfect T Accounting on Mesa, Arizona provides some insights. Here’s how the changes in 2018 tax code line items could affect you during this filing and for years to come.

Write Offs Are Still On

The changes to residential property owners and the amounts available for mortgage interest and property tax write-offs do not apply to rental property owners. And it’s not a bad thing. Commercial property owners will still receive the same tax benefits as before the new tax code went into effect.

All the same standard write-offs you came to know, love and experience with owning residential rental property still exist including utilities, repairs and maintenance, yard care and maintenance, insurance, association fees (if applicable) and depreciation. But there is a caveat here.

SALT Deduction Can Sting

If you have rental property and also live on the property (i.e. duplex, triplex or other multi-unit properties), you will have to succumb to the new tax law modifications, which limits your property tax write-off at $10,000.

If that doesn’t sting enough, property tax write-offs now fall under what is known as the SALT deduction. Property taxes are just one element of SALT, which is comprised of state and local taxes. Within SALT the numbers will add up more quickly because it includes property taxes, and income tax or sales tax.

Arizona property owners continue to enjoy the benefits of categorically low taxes, compared to other states, perhaps offering a buffer to the impact of SALT.

The Floodgates Opened Up for Section 179 Deduction Guidelines

Maintenance and depreciation on a property are normally taken over time during ownership. But the Section 179 deduction allows property owners to completely expense an asset in a single year”, explains Jennifer Johnson. “Maintenance and repairs are normally expensed on the profit and loss statement of a business. However, major upgrades can be considered an asset and added to the depreciation schedule. For example, new flooring for a building would be considered an upgrade. This would be added to the depreciation schedule by using the 179 deduction. Just make sure this is in the best interest of the business financials for that year.”

Not every commercial property owner will stay within these income limits. There are actions that can be taken in these circumstances. Johnson details the options. “If a taxpayer goes over the limitation, they may want to lower their income by moving property ownership to one of their other businesses, move funds to trusts or pension plans, charitable donations, and use the 179 deduction or bonus depreciation.

2X The Bonus Depreciation

Good news for those with qualifying properties that meet the guidelines for taking bonus depreciation within the first year, instead of drawing depreciation out over the course of property ownership. In fact, as long as the property was placed in service after Sept. 27, 2017, and before Jan. 1, 2023, bonus depreciation jumps from 50 percent to 100 percent, if taken in total within the first year. For property

acquired prior to September 28, 2017, and placed in service before January. 1, 2018, bonus depreciation stands at 50 percent.

To meet the criteria, your subject property must provide for all of the following:

  • Taxpayer’s property acquisition was not in any way due to a family relative.
  • Taxpayer did not use the subject property before owning it.
  • The person who sold the property to the taxpayer did not use the property before owning it.
  • Taxpayer didn’t obtain the property through a member of a controlled group of corporations:
    • Brother-sister group
    • Parent-subsidiary group
    • In combination of the above groups
  • Tax basis of property is not configured through adjusted property basis, from seller or transferor
  • Tax basis of property is not configured based on acquisition from a descendant
  • The cost of the property doesn’t include basis of eligibility due to other property ownership held by taxpayer at any time

New to the Bonus Qualifiers

Entertainment industry players have now received an affirmative nod for their ventures. The TCJA now includes film, television and live theatrical production assets as a new type of qualifying property that could take advantage of the new 100 percent bonus depreciation, though all the criteria must be met to be deemed as a ‘qualifying’ property.

Tax Loss, PALS and Carryforwards

If you own more than one rental property, chances are you’ve experienced a tax loss, unless you purchased the property with equity built in, have minimal-to-none vacancy rates, minimal deferred maintenance to deal with, or have owned the property for quite some time.

Otherwise, you likely look forward to exercising your rights under PAL (passive activity loss) provisions. This allows you to deduct losses from a rental property as long as you have either sold the property that generated the losses or receive enough passive income from other sources to help offset the loss.

Here’s how it works now:

  • Current year business loss can offset up to $250,000* of income from other sources**
  • Above stipulation is applied after meeting the PAL rules
  • Married taxpayers can go up to $500,000 of other income **Other income includes self-employment income, salaries, interest, dividends, and capital gains

While net operating loss (NOL) carryforwards were allowable for a two-year carryback and a 20-year carry forward, 2018 tax filings will see a change. “Now net operating losses can only offset 80 percent of taxable income in any given tax year but they can no longer be carried back. It can, however, be carried forward any number of years. With these changes, a careful look at a company’s income for the past few years should be considered. Revisions cannot usually be made when a company elects to carry forward or back, but a revision to this rule allows you to revisit tax returns from 2014 to 2017 to assess whether amending those filings is warranted.”

Like-Kind Isn’t Personal Anymore

Many businesses utilize 1031 exchanges as a way to not only acquire new property, replacing sold property with like-kind property as a means to defer tax liabilities, but also in the acquisition of new equipment, deemed personal property.

For example, let’s say the owner of a landscape architect business also had a crew that would handle the design, development and planting of landscapes in addition to the maintenance of them. As such, the owner may own real property as his business headquarters but also own personal property as in a fleet of trucks for the staff.

Before the new tax code, he could sell his business real property and include the fleet of vehicles, and upgrade his properties (both structures, land AND vehicles) by purchasing another business through a 1031 exchange for real and personal property.

But this year, due to the changes in 2018 tax code, personal property can no longer be included in an exchange. There are exclusions to this if one part of a personal property exchange was exercised before December 31, 2017 but other parts of the same deal were not.

For all matters related to 1031 exchanges, both real and personal properties, it is best to consult with your real estate and financial advisors.

Don’t Pass Over the Pass Throughs

Good news on this! The tax you pay on real estate investment income has shifted in your favor. Johnson said, “The new 20 percent deduction applies to service businesses as well, for pass through entities, such as S-corps, partnerships and LLCs. But the IRS has a phase out of this deduction for couples whose qualified business income hits $415,000 (married and filing jointly); and $207,500 for single filers (or married filing separate). One more thing, if you are in a business partnership, divide the qualified income by two to figure the actual portion of income to be applied for that business owner.”

Professional Advice from Industry Experts Is Second to None

Like any business, there are knowledgeable people skilled at what they practice. Not every real estate property owner is an expert in all matters of the business, especially when it comes to the financial aspects and tax law. One wrong move based on misinformation and it could set you back.

Before you decide to buy, sell or renovate commercial property, check in with your trusted real estate broker, financial advisor and CPA to come up with the right course of action for you and your business. Consult with a Commercial Real Estate Professional Now

The First Quarter Is the Best Time to Reevaluate Real Estate Needs

The First Quarter Is the Best Time to Reevaluate Real Estate Needs

Fresh starts to your new year should go beyond unfulfilled resolutions about diet and exercise. To really get ahead on improving your life, start with taking a long, hard look at your current commercial property portfolio. Is it performing to expectation or falling short? Having to assess your holdings isn’t easy, in fact; it could be painful, especially if getting a grip on reality has been put on pause for the past year. So set some time aside for this reality check. Grab a pen, paper or your favorite screen and keyboard because you’ll want to take some notes. First quarter 2019 is the right time to revisit your real estate and design a game plan that meets your goals.

Real Vision Supersedes Blind Ambition

We’ve all done this. Investors and real estate brokers alike – boasting about the deal they got on a property purchase. In fact, we love to retell that story as often as possible, even when enough time has passed deeming it old news. But if your real estate holdings are truly screaming “What have you done for me lately,” it might be time for a change.

Did the market change? Did the market value change? Did the rent roll take a nosedive instead of an increase? Did your property management company raise their rates or provide lackluster service? These are just some of the many questions you should be asking yourself when reevaluating your real estate as they all affect the financial balance that defines whether keeping real estate or obtaining more is worth the risk.

Put emotions and stress aside. It’s time to establish the next steps.

Real Estate Holdings Game Plan for First Quarter 2019

Most people engage in acquiring commercial property as the means to increase their worth through somewhat passive income (somewhat because it can require hands on attentiveness in dealing with tenants) and increasing value which, over time, equates to equity. However, things can happen beyond your control that can make a solid plan turn sour.

  • Did you have a life event happen that affected financial security or overall asset value?
  • Are there unexpected financial obligations that put more stress on monthly expenses?
  • Do you have enough cushion to withstand any of the following, should it take place over the course of this year:
    • Job or business loss
    • Real estate market value downturn (10%) of your holdings
    • High-end property maintenance expenses such as HVAC, roof or structural repair or replacement
    • Increase in vacancies (more than 25%)
    • Geographic plight (decay of neighborhood or area of property location)

Time changes everything, for the good and not so much. This is why it’s crucial to review commercial property value (perceived, intrinsic and potential) in the first quarter each year to allow for adjustments to be made with minimal consequences.

For example, if after assessing your personal situation and weighing the strain that real estate may be putting on you and overall goals, you decide that the time may be right to sell the property and reallocate some or all of the gain into other property(s), there’s still time to entertain a 1031 exchange.

Revisiting Rents

It’s important to keep a constant watch on what current rental rates are within a mile or two in proximity of your subject property and classification. As supply wanes, and demand increases, you could be missing out on additional income when current leases are set to expire. This can also be a sticking point in negotiations that can go in your favor, should your tenants want to discuss a relocation or tenant improvements.

The Meeting of Both Minds

Time has a strange way of changing our perspective. If you’ve been in real estate for some time, chances are, you like a good challenge with an upside. But there’s often a cost, which has little to do with money.

The price of owning real estate can bury a person’s mental health. What seemed worth the risk of one’s psychological wellbeing at 45 years of age can seem very different at 62 years young. The financial gain, each year, may not be worth the headache. Diversification of portfolio could be appearing as the best option. For those who own real estate, say a handful of small properties, and self-manage and/or take care of the maintenance and repairs needed on site, relief may not necessarily come in the sale or reallocation of assets but in hiring a third party to take the burden off, and free up time to be able to enjoy life more.

Eyes Wide Open for Today’s Real Estate Opportunities

Commercial property investing has embedded itself into the digital marketplace. It’s easier than ever to get a piece of real estate ownership, without the overriding stress than accompanies the responsibility.

Many people new to real estate investing are getting involved in REITs or crowdfunding for real estate. REITs allow you to buy shares of real estate, similar to how you purchase stocks. If you buy low and sell high… you know the rest. The types of REITs are based on rental properties (residential and commercial) or mortgage debt.

Crowdfunding real estate provides the perfect vehicle for the small investor to step into bigger shoes, sharing the risks exponentially. Like REITs, crowdfunding real estate comes in two options: equity or debt based investments. Crowdfunding of properties has only been available to the larger public since 2015, leaving success rate analysis scant. The key here is the longer the hold, the more likely the profit, especially with the equity crowdfunding.

Agility Is the Smorgasbord of 2019 Investing

As we’ve seen in the stock market this year, anything can happen. Because financial news travels in the blink of a click or swipe and can live online forever, accuracy in discovering what’s real and what’s perception can sway markets easily. The new focus in investing is honing the ability to jump from one trend to another without losing your shirt. Not the challenge that many property owners prefer but, according to Deloitte®, “Realign business priorities and adapt to new demands. The most agile will win away customers and top talent—along with investment dollars.”

Get Out From the Old and Into the New

Think of the first quarter of 2019 as your commercial property wake up call. Dust off your old ways of thinking and be open to lines of opportunity that could minimize time vested, and expand cash flow and long term gain. COBE Real Estate brokers, agents and property managers can help give you a refresh on your current portfolio and provide recommendations to help you achieve your goals for this year and into the future.

Fresh Starts in Real Estate Investment Success Happen Here