Have the prices of commercial properties dropped like residential properties?

Asked by joy Shim, Camarillo, CA Sat Sep 5, 2009

House prices have dropped since 2006 in California, where I live, and now are at the prices of 2003. I am wondering if prices of commercial properties have dropped as well. I want to know if it's a good time to sell a house and buy a commercial property, for exchange, which yields 6% or more cap now.

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Tracy Lu Gui…, Agent, Camarillo, CA
Thu Nov 5, 2009
The commercial market is really taking a beating now...just driving around the county you will see a ton of "available" and for sale signs on commercial properties. I think it would be a wash....selling your home low to buy a commercial property low...sounds solid to me.
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Ted Mackel, Agent, Simi Valley, CA
Sat Sep 5, 2009
Joey, There are properties selling at higher caps and we will see cap rates go double digit on some properties. I think 6 cap in this market is overpriced. Tenant mixes are going to undergo a very difficult transition as the mom and pops that used to fill out centers continue to diminish. The loss of our mom and pops are unrelated to the recession but more that business models are changing.

I'd look at industrial before retail.
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Barry Shapiro, Agent, Camarillo, CA
Sat Sep 5, 2009
Hello Joey,

The observation you make is accurate. I assume the SFR house is not a personal residence or second/vacation home. The investment property can be exchanged for a "like-kind" property, including commercial property, industrial, shopping center, vacant land, multi-family residential, etc. There is a plethora of additional reasons why one might consider an IRS Tax-deferred exchange: Increase cash flow, Eliminate property management headaches, Defer capital gains, Reduce liability and exposure to lawsuits, Geographic diversification and Participate in renewed depreciation potential.

As with residential, due-diligence is paramount to success... There a several opportunities available locally for commercial investment. I would be happy to sit down with you and my commercial-licensed team member to explore these alternatives. Good luck in solving your investment property challenges!
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