It's better to make money and pay taxes to Uncle Sam

Many investors put too much emphasis on appreciation/tax write offs and too little on income. They invest in residential properties in which the rental income is much less than the mortgage payment. They have negative cash flow on the investments and thus are able to reduce their tax liabilities. They hope, assume and bet that the properties will appreciate quickly so they can make a quick profit. Once the properties reduce in value, they are in financial trouble as evidenced in the current market.

Commercial properties generate a lot more income, 50% to as much as 250% more than residential properties so investors have good positive cash flow. The "problem" is investors would have to pay Uncle Sam taxes for the positive cash flow. This should not be viewed negatively. This is a good "problem". It's better to make money and pay taxes than to lose money so one can write off taxes.

Here are the facts:

1. Washing Mutual failed because it ran out of cash.
2. Lehman Brothers declared bankruptcy because it did not have enough cash.
3. Lots of residential investors face foreclosure because they don't have enough income to pay for their mortgages.

To retire (you don't have to wait till 65 to do so), you need cold hard cash to cover your expenses. Commercial properties deliver lots of that. With all the headlines about foreclosures in residential real estate, of course you would be skeptical if it is a good time to invest in commercial real estate now. This advisor has seen several sale and lease back (sellers become tenants after closing) restaurant portfolios recently in which the listing prices are $700K to $1M (about 30%) below the appraised values. The sellers reduce the rents to the new investors to compensate for the lower the asking prices. When you acquire this kind of properties, you put your money in very low risk investments. If you believe you should buy when others sell and sell when others buy then it’s a good time to bargain now.