Wanted to update again my story about the sale/1031 exchange of my house in Chevy Chase (Washington DC area). (You can follow the thread back to my original message.) The short story: Bought my humble 1850 sq ft ranch house in 1995 in Chevy Chase for $373,000, sold it to a builder who never set foot in it as a tear-down for $1,050,000 in 2005. He put it back on the market for $3,000,000 last fall as a 7200 sq. ft. monstrosity. It's finished now and still on the market; he's dropped the price 50k but still no takers.
On my end, I did a 1031 exchange into a $4 million retail strip with a Blockbuster, music store, and bagel shop tenants. The income has been pouring in and is doing better than 9% cash flow, but the signs of trouble are starting to bubble. The music store, which is actually a local cult favorite, has decided to open a new shop and is making noise about terminating the lease on the old shop. I resisted, but I think they're planning something. It's a five year lease, so I can't see a way out for them without paying me a nice chunk of change. The bagel shop is thriving, post-Atkins and all, but they have the smallest space so they don't have much impact. And of course Blockbuster is a basket-case at the corporate level; one wonders how long it is before they start slashing unproductive stores. This store does well, but it is a very large space. I know the property is desirable enough that I could get a Chipotle or Starbucks to leap at the chance to get in, but it would definitely be a hassle (as well as expensive), and the whole point for me going into commercial property was to make things simple. On the good side, I have a huge tax deduction that reduced my taxable income by half, and I'm still bringing in strong cash flow for me and my two other investors. Warning: the legal/tax issues to a 1031 exchange and commercial property is daunting. I could write a book. . . .
Doughboy. |
