Discussion / answer 2 questions and comment on 2 students / about 300

Question 1:

What are the main reasons that corporations may choose to own real estate?  What factors tend to make leasing more desirable that owning?

Student 1:

The main reasons that corporations may choose to own real estate are for the following reasons: 

Allows for control of the property: Corporations might opt to own real estate when they plan on making substantial renovations to the property. If the property was leased, the corporation will need permission to renovate and change the facility to fit your business goals. 

Long term costs: Owning a property can be cheaper in the long term without a landlord periodically raising lease prices every year or every few years. Overall owning the property can save a lot of money and you can utilize your extra spaces for other business ventures. 

The ability to find a location with appreciating land values: If a corporation has found a location with land values that continue to increase, it is better to get onto the trend of buying this property as land values increases. 

Tax Benefits: Purchasing a property can cut your taxes in contrast to having a lease that doesn’t. 

A few factors that make leasing more desirable to a corporation rather than owning is if cash flow is an important resource. For a business that needs the cash flow, it will be more logical to lease since upfront costs are less than making a purchase that involves placing a down payment. Corporations will also lease when they don’t want the hassle of maintaining the property and ensuring structural sound of the building. Businesses that require flexible mobility would rather lease than owning a property.

Source: 

Deciding Whether to Lease or Buy a Business Facility. Wolters Kluwer. 2020. Accessed (2020 Nov 10). URL: https://www.bizfilings.com/toolkit/research-topics/office-hr/how-to-decide-whether-you-should-lease-or-buy-a-business-facility (Links to an external site.)

Question 2:

Please read the following two short articles on transactional funding for real estate deals. Please bring back something that you learned or found interesting about transactional funding. Please also share whether or not you have utilized transactional funding or would use it in the future.

Why Every Wholesaler Needs Transactional Funding In Their Toolbox

https://www.biggerpockets.com/forums/93/topics/414424-why-every-wholesaler-needs-transactional-funding-in-their-toolbox

 How Transactional Funding Works

http://smallbusiness.chron.com/transactional-funding-works-10204.html

Student 2:

Something I found interesting is that short sales of real estate have same day closing to other buyers for a huge gain. I have never heard of these types of deals before. I think it might take lots of expertise knowledge of the field to really do this. You need the right resources, team, the customers who are willing to buy, the banks that are wiling to offer this deal to you and then to someone else.

I have never used or utilized this previously. It looks like a very great money making career. But I think it might be harder than it seemed. Something similar I heard of with fast sales are large corporations buying bundles of properties in a city in extreme large scale for a great discount price. Because they bought so much properties, the properties for sell in the region ran low. Prices went up and the large corporation sold the properties quickly to buyers with “relatively good prices” to the local investors. After a few months, the house prices dropped because the market is saturated again with large numbers of properties looking for sale and the amount of buyers are now minimum. The bundled sale strategies for large corporations made good money out of small investors who fell behind the sharp fall of housing prices due to saturation by bundle purchases and large scale sales.

Back to the short sale topic in the paragraph, I think this idea is a good way for investors to make lightening transactions that are profitable. I still think it is quite risky as new comers may find it hard to get al the steps correct in the first step. An example I want to share is that during the transaction of the property which is occupied by tenants, it is best to negotiate and get the accrual month rent addressed. I have this noticed and the first month rent can be gone all to the seller. These types of small details or small things sometimes only value a few hundred dollars revenue. Other times, it worth the entire transaction to be failed. I think that people doing real estate business must have this “attention to details” method of thinking that is quite different from the attention to details in accounting.

Sources:

David Wolf (3 years ago). Why Every Wholesaler Needs Transactional Funding In Their Toolbox.

Retrieved From: https://www.biggerpockets.com/forums/93/topics/414424-why-every-wholesaler-needs-transactional-funding-in-their-toolbox (Links to an external site.)

Vanessa Cross (No Date). How Transactional Funding Works.

Retrieved From: http://smallbusiness.chron.com/transactional-funding-works-10204.html

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