Taking another look at commercial real estate trends

In a recent post, we examined some of the ways that the commercial real estate market has responded to foreclosures. In some cases, the events have provided an investment opportunity.

A real estate investment trust, or REIT, is another example of how investors might obtain foreclosed properties. A REIT is a type of real estate entity that allows investors to invest in income-producing real estate. Some commentators have compared REITs to the mutual fund model. Instead of securities, however, a REIT involves real estate, such as a collection of foreclosed homes renovated for resale or rental.

As might be expected, there can be tax implications associated with a REIT or other type of real estate investment. An attorney that focuses on real estate sales and investments can help a party to such a transaction understand those tax consequences, as well as other potential business issues.

Given the rise in foreign investment in U.S. commercial real estate, the importance of having an attorney review a proposed real estate transaction cannot be overemphasized. For example, Chinese companies invested around $14 billion in American real estate in 2013, a total that more than doubled from the previous year.

Such foreign investment companies may be similar to their American REIT counterparts, but an attorney can help parties understand the important differences. Regardless of the type of investment entity, it’s a smart idea to have an attorney present for any large transaction involving real estate. The potential questions that may arise can be complex, often requiring an attorney’s expertise. The list of issues may be extensive, such as title examinations or defects, tax consequences, mortgage financing questions, permit or zoning issues, and/or simply negotiation tactics.

Source: Real Estate Weekly, “Foreign investment in U.S. real estate widely underreported,” Jason D. Meister, Aug. 29, 2014

Related post: “Commercial real estate companies adjust to foreclosure market,” July 4, 2014