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Some commercial real estate investors considering selling

On Behalf of | Jan 22, 2018 | Commercial Real Estate

Ccommercial real estate can be a great way to develop a Missouri investor’s portfolio and continue to bring in consistent income. As job growth continues on an upswing along with the stock market, the value of commercial properties can continue to grow as can the income associated with them. However, despite the positive atmosphere associated with commercial real estate, sales are also on the rise among investors.

In the third quarter of 2017, transaction volume grew by 3.2 percent from the previous one. This may bring to mind a question about why some investors are selling despite a growing economy and tax reforms that could benefit them. Under new tax laws, real estate investors do not have limits imposed on their deductions for interest, unlike other businesses. The depreciation time has been significantly reduced for commercial properties as well, from 39 years to 25 years.

In addition, tax changes also make some capital expenditures in real estate fully deductible, while real estate investors can also defer capital gains taxes by reinvesting in like-kind properties. In general, there is a consistent 10-year cycle in commercial real estate values and some analysts believe the plateau has already been reached. Other analysts are concerned about inflation amid rising wages, tax cuts and a growing federal budget deficit. This could lead to higher interest rates, which are often accompanied by decreasing property values.

Commercial real estate investors who are considering selling their properties or reaching out into new markets would be well-advised to consult with a real estate attorney. There are a number of ways that legal counsel can be helpful, including preparing the required documents.