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Owning property is a longterm commitment that limits flexibility and comes with some hefty costs. Rent solves these problems. A small company thats growing migh

Owning property is a longterm commitment that limits flexibility and comes with some hefty costs. Rent solves these problems. A small company thats growing might need 2000 sq/ft today and a projected 10,000 sq/ft next year. But if you have to purchases and maintain 10,000 sq/ft for a year, that to be prohibitively expensive to the point that they can't afford to grow that much. Why then is it ridiculous for me to own 10,000 sq/ft and parcel it out to 5 business that need 2000 sq/ft? I'm taking on the costs of owning and maintaining the property, as will as taxes and other assorted costs. It is fair for me to pass those costs on to the actual tenets of the property for as long as they choose to reside on the premises. They get flexibility and scalability, and I get money for my time and effort to provide their needs.

pc86 4y ago
You're taking on the cost of purchasing the property, which is certainly not nothing. But as a commercial landlord, your tenants pay all the costs of owning and maintaining it, they pay all the taxes, they pay everything. Every commercial lease is structured this way. You have an outlay of capital to acquire the property up front, and you have a minimal amount of risk if a large portion of the property goes unrented. But even a brand new owner will typically only need to reach 30-40% occupancy by square footage in order to break even, and the unrented portions can be written off for a tax credit. I would love it if the commercial landlords I've rented from in the past were providing services for the exorbitant checks they were getting every month, but the only different I've encountered between commercial landlords and residential slumlords is that there are generally government protections for the tenants of a slumlord, commercial tenants not so much.
- ejstronge 4y ago
  > Every commercial lease is structured this way. Triple net leases are quite desirable for landlords but by no means are the sole kind of commercial lease. The most common splits some of the costs of building maintenance (a ‘modified gross’ lease)
  - pc86 4y ago
    Good luck trying to negotiate any gross or modified gross lease when everyone else in the building is on triple net. They're better off taking the tax deduction than cashing your rent check.
- amflare 4y ago
  Maybe they pay all the costs, but thats when there are tenants. The landlord is taking on the risk of being the one the bank will come to when a mortgage needs to be paid. And the effort of maintenance (and cost, then there are no tenants). All the tenant needs to do is show up and sign a check, they have no other worries. Thats the trade-off.
  - fy20 4y ago
    A big plus of being a landlord in our current time period is that what you charge the tenants in rent covers: a) the cost of your time b) the cost of maintaining the property c) the cost of paying interest on the loan d) the cost of repaying capital on the loan. After 30 years or whatever once the mortgage is paid off, the landlord's costs will drop significantly, but the amount they charge tenants still takes into account the last two, which is why being a landlord is often seen as a great way to fund retirement. One way to change that could be to have mortgages that have an unlimited term and are interest only. The way the landlord wouldn't need to charge (d) to tenants and they only advantage to them being a landlord would be (a). But I'm sure if that were to happen capital costs for properties would increase significantly that at the end of the day rents would be exactly the same as they are today.
- ryanwaggoner 4y ago
  Can you tell me more about this tax credit that you supposedly get for unrented property that you own?
  - refurb 4y ago
    It’s a business expense that you can deduct, no different than if you were renting it. Net income = rent - expenses If it’s not rented out you can still deduct the expense, and if negative you might be able to carry the loss forward. But it's crappy because you have no rent to make up for the expense, so you're still losing money, just less than the full rent. It's not like it's some magic trick or some perk landlord's get that magically gives them free money.
    - ryanwaggoner 4y ago
      You can deduct your actual expenses, but you can’t deduct rent that you didn’t receive because the property was vacant, or get a “tax credit for unrented property” as was claimed.
- refurb 4y ago
  Sounds like just buying the commercial property is better for you? So just do that?
- twelve40 4y ago
  > your tenants pay all the costs of owning and maintaining it, they pay all the taxes, they pay everything To play devil's advocate, what if the tenants are actually fully compensated for that with a rent that would have been much higher across the entire market if the landlords were paying for all that? > only need to reach 30-40% occupancy by square footage in order to break even, and the unrented portions can be written off for a tax credit you seem to imply that commercial landlords are raking it, I think? But, afaik (and I'm admittedly not super-familiar with this), commercial real estate is an open, competitive market? So, given that, why doesn't it get flooded with supply of everyone who rushes in to build and collect those fat margins? Maybe there is still something there that makes it not as lucrative as it seems?
  - count 4y ago
    It's not an open or competitive market. It's a fractured, locality-heavy market that's actually operated more like a cartel in many (especially small to mid size) areas. You are never free to just buy a building and do what you want with it - the City has to vote, approve use, permits, etc. All of which conspire against a 'free' market in any sense. As an example, of the ~30 or so large scale commercial buildings in my local downtown, there's a total of 3-4 owners. You only know this if you know the lawyers who put together the property deals, as each is hidden behind it's own management company and rented through one of 2 commercial real estate management firms (conveniently owned by the same 3 people). There is no 'rush in to build', as there is no land at all remaining in the city to build new on - any construction requires demolition first. Again, permits, historic district permits, etc. all conspire against the newcomer.
pessimizer 4y ago
> I get money for my time and effort to provide their needs. This is a pretext. You get money, give as little of it as possible to the people who are doing what you claim to be doing (maintaining the property), and pocket the rest. Owner is not a job.
- gruez 4y ago
  >Owner is not a job. Is this an issue? Without getting into an argument about what counts as a "job", what's wrong with someone investing money and getting paid for it?
latortuga 4y ago
This....is not how the majority of commercial leases work. Look up "triple net" leases.

pc86 4y ago

You're taking on the cost of purchasing the property, which is certainly not nothing. But as a commercial landlord, your tenants pay all the costs of owning and maintaining it, they pay all the taxes, they pay everything. Every commercial lease is structured this way. You have an outlay of capital to acquire the property up front, and you have a minimal amount of risk if a large portion of the property goes unrented. But even a brand new owner will typically only need to reach 30-40% occupancy by square footage in order to break even, and the unrented portions can be written off for a tax credit. I would love it if the commercial landlords I've rented from in the past were providing services for the exorbitant checks they were getting every month, but the only different I've encountered between commercial landlords and residential slumlords is that there are generally government protections for the tenants of a slumlord, commercial tenants not so much.

ejstronge 4y ago
> Every commercial lease is structured this way. Triple net leases are quite desirable for landlords but by no means are the sole kind of commercial lease. The most common splits some of the costs of building maintenance (a ‘modified gross’ lease)
- pc86 4y ago
  Good luck trying to negotiate any gross or modified gross lease when everyone else in the building is on triple net. They're better off taking the tax deduction than cashing your rent check.
amflare 4y ago
Maybe they pay all the costs, but thats when there are tenants. The landlord is taking on the risk of being the one the bank will come to when a mortgage needs to be paid. And the effort of maintenance (and cost, then there are no tenants). All the tenant needs to do is show up and sign a check, they have no other worries. Thats the trade-off.
- fy20 4y ago
  A big plus of being a landlord in our current time period is that what you charge the tenants in rent covers: a) the cost of your time b) the cost of maintaining the property c) the cost of paying interest on the loan d) the cost of repaying capital on the loan. After 30 years or whatever once the mortgage is paid off, the landlord's costs will drop significantly, but the amount they charge tenants still takes into account the last two, which is why being a landlord is often seen as a great way to fund retirement. One way to change that could be to have mortgages that have an unlimited term and are interest only. The way the landlord wouldn't need to charge (d) to tenants and they only advantage to them being a landlord would be (a). But I'm sure if that were to happen capital costs for properties would increase significantly that at the end of the day rents would be exactly the same as they are today.
ryanwaggoner 4y ago
Can you tell me more about this tax credit that you supposedly get for unrented property that you own?
- refurb 4y ago
  It’s a business expense that you can deduct, no different than if you were renting it. Net income = rent - expenses If it’s not rented out you can still deduct the expense, and if negative you might be able to carry the loss forward. But it's crappy because you have no rent to make up for the expense, so you're still losing money, just less than the full rent. It's not like it's some magic trick or some perk landlord's get that magically gives them free money.
  - ryanwaggoner 4y ago
    You can deduct your actual expenses, but you can’t deduct rent that you didn’t receive because the property was vacant, or get a “tax credit for unrented property” as was claimed.
refurb 4y ago
Sounds like just buying the commercial property is better for you? So just do that?
twelve40 4y ago
> your tenants pay all the costs of owning and maintaining it, they pay all the taxes, they pay everything To play devil's advocate, what if the tenants are actually fully compensated for that with a rent that would have been much higher across the entire market if the landlords were paying for all that? > only need to reach 30-40% occupancy by square footage in order to break even, and the unrented portions can be written off for a tax credit you seem to imply that commercial landlords are raking it, I think? But, afaik (and I'm admittedly not super-familiar with this), commercial real estate is an open, competitive market? So, given that, why doesn't it get flooded with supply of everyone who rushes in to build and collect those fat margins? Maybe there is still something there that makes it not as lucrative as it seems?
- count 4y ago
  It's not an open or competitive market. It's a fractured, locality-heavy market that's actually operated more like a cartel in many (especially small to mid size) areas. You are never free to just buy a building and do what you want with it - the City has to vote, approve use, permits, etc. All of which conspire against a 'free' market in any sense. As an example, of the ~30 or so large scale commercial buildings in my local downtown, there's a total of 3-4 owners. You only know this if you know the lawyers who put together the property deals, as each is hidden behind it's own management company and rented through one of 2 commercial real estate management firms (conveniently owned by the same 3 people). There is no 'rush in to build', as there is no land at all remaining in the city to build new on - any construction requires demolition first. Again, permits, historic district permits, etc. all conspire against the newcomer.

pessimizer 4y ago

> I get money for my time and effort to provide their needs. This is a pretext. You get money, give as little of it as possible to the people who are doing what you claim to be doing (maintaining the property), and pocket the rest. Owner is not a job.

gruez 4y ago
>Owner is not a job. Is this an issue? Without getting into an argument about what counts as a "job", what's wrong with someone investing money and getting paid for it?

latortuga 4y ago

This....is not how the majority of commercial leases work. Look up "triple net" leases.