Anthony’s Analysis: When is the Perfect Time to Buy or Sell Commercial Real Estate?
I am often asked: Anthony, should I sell today, should I lease lease today, what really is the best avenue to take? My short answer always is “it depends.”
This is not a cop-out answer but really the truth because there are many variables a property owner needs to consider when confronted with this issue.
Let’s look at a some of the issues or questions an owner should ask oneself before deciding:
- Do I have a lot of debt on the property?
- Do I enjoy being a landlord? Am I good at being “hands on” or is it better o be a passive owner?
- What will I do with the money, once I sell?
- Will I have capital gains?
- Should I do a 1031 Exchange?
- Do I want to leave property to my heirs? What kind of property?
- Am I getting the highest rent possible with this property?
- How can I maximize my rent?
- Should I make improvements?
- Do I have the capital to do so?
- How long of lease should I take?
- What type of lease? Net? Net Net? Net Net Net? Gross? Modified Gross? Full Service Gross?
- Is there a better and higher use for the property today?
- Do I have partners?
- What is happening with the area? Is getting better or worse?
- Is there a good pool of tenants to choose from?
- What is happening in the local economy?
- Has this property run its course?
- Is it fully depreciated?
- Are there alternative options for me?
The above is a summation of the items, issues and concerns I discuss with my clients to figure out the best course of action one should take with their commercial real estate to help maximize their income.
Each one of these should be considered, discussed and carefully thought through. These are the questions to acknowledge more so than trying to time the market.
The ones that try hard to time the market often miss the mark. Greed or fear soon take over and opportunities get missed.
Real estate is a longer-term investment and one needs to have patience and a long-long-term prospective.
Real estate does run in cycles. I am not suggesting to ignore the highs and lows of valuations, but to take a long-term approach and really assess “your” personal situation.
They are both advantages and disadvantages to buying at the peak, buying at the low, selling at the high or selling at the low.
Anthony S. Behar