Real estate transactions can be tricky, even for experienced real estate professionals. Before you sign on the dotted line, it’s a good idea to brush up on your knowledge.
Common types of real estate transactions in Houston include site selection/acquisition, new lease initiation, disposition, lease termination/subleasing, and 1031 exchanges.
Site Selection/Acquisition
Some investors make the mistake of thinking that location is all that matters. When purchasing commercial real estate, you should also consider if the trade area supports surrounding market demand. Every market is different, so consider area demographics carefully.
In addition, it’s desirable to be visible with prominent frontage. People don’t visit a business if they cannot find it. Plus, having nearby infrastructure that’s supportive is ideal, as seen with popular mixed-use work/live/play environments.
New Lease Initiation
Being a savvy negotiator is imperative. To come across as uber-confident, review the lease agreement in detail so you can discuss it without hesitation. Guard against fraud and misconduct by being clear about rent, future increases, tenure, and signage.
It’s also a good idea to discuss additional space that the tenant may want to add in the future at the beginning of the lease term to avoid misunderstandings later.
Disposition
There are tried-and-true strategies for disposing of an asset. Typical strategies are to do a traditional sale or complete the sale with owner financing. You should attempt to immediately respond to any offers and have paperwork prepared ahead of time.
Many sellers opt to work with a professional broker, but it’s not mandatory. Partnering with a real estate lawyer for this process could be helpful.
Lease Termination/Subleasing
Generally speaking, tenants in Houston can break a lease as long as they’re willing to suffer the consequences. This could include harsh financial penalties, so subletting is sometimes the preferred option.
Some leases have clauses that prohibit subletting, and even when allowed, subletting doesn’t release the original tenant from all obligations. If the person subletting causes damage or vacates without warning, the original tenant is typically liable.
1031 Exchanges
The first question people usually ask is if it’s possible to defer capital gains taxes by opting for a 1031 exchange. The short answer is yes, but as with anything involving the IRS, the process is complicated.
A 1031 exchange is basically swapping one like-kind investment property for another. There’s no limit on how often you can do a 1031 swap, so you could earn profit from every swap you do but not pay any taxes on them until years later when you sell in a cash deal. Limitations apply.
Find Out How a Lawyer Can Assist You
Before you destroy your credit and good name by subletting to the wrong person or negotiating a 1031 exchange incorrectly, talk to an attorney. Knowing the common types of real estate transactions helps but doesn’t replace legal advice.
The Curry Law Firm will help you avoid the usual pitfalls and help with a smooth transition into a new home or a profitable business venture. Call 713-574-2070 or fill out our online form for a consultation.
