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Los Angeles Real Estate Law Blog

Proptech to benefit properties with commercial leases

A brand-new generation of software platforms is changing the world of property investing. These new platforms can monitor energy and water use in buildings, for example. These applications, called proptech, offer promise to investors in Los Angeles who are interested in purchasing buildings with commercial leases, as they provide a new way of generating value for their tenants.

A particularly valuable service that proptech offers is providing tenants with on-site access to services designed to enhance their quality of life, such as medical treatment. Other proptech perks that investors can take advantage of include being able to monitor such factors as safety status and steam consumption. They can also monitor indoor temperature and occupancy.

Climate change may impact properties with commercial leases

For investors in Los Angeles and elsewhere, measuring risk against opportunity is paramount. In the real estate market, investors are especially concerned with the increased risk they face due to climate change, as natural disasters cost damages totaling over $300 billion in 2017 -- a record. For this reason, investors who are interested in buying properties featuring commercial leases may want to more aggressively calculate climate risk as well as its potential effect on their property portfolios.

Large real estate companies have already poured resources into making these calculations to determine how rising sea levels and frequently occurring extreme weather are impacting their portfolios. Failure to do this may cause investors to be unprepared for the worst. Meanwhile, those who are proactive may put themselves in the best position to outperform their competition.

Limit risks when establishing a limited liability company

Starting a business or establishing a partnership has the potential to bring both financial and legal risks to all parties involved. This is why it is critical for parties to do their due diligence to limit their risks and proceed thoughtfully. It is prudent for all parties to understand what to expect from the formation process.

There is a perception that the process of forming a California business will be both complicated and confusing. However, that does not have to be the case. Whether your LLC will be a small business venture, real estate investment partnership or other type of operation, you can strive from the beginning to lay the foundation for a strong future and lower your chance of facing complications in the future. The time to work to minimize your risks starts now.

Helpful suggestions to reduce the risk of real estate litigation

Finding commercial real estate that suits the needs of a company and fits within its budget is not easy, especially in Los Angeles. Real estate is expensive, and people buying or selling would be wise to take steps to protect their interests as they move forward. Failure to proceed carefully can expose a business to legal and financial complications in the future and increase the chance of real estate litigation.

A letter of intent is an important step in this type of real estate transaction. Most of the terms included in these letters are not binding, but it is still wise to have guidance when drafting one. In these letters, a buyer or seller can address issues such as the selling price, contingencies and other important details. These letters can be particularly important in a market that is showing signs of slowing down, which is currently happening in California.

Recession should not hit commercial leases

Recent financial headlines have called attention to the likelihood of a recession in the near future. Recessions have a tendency to precipitate real estate market declines. However, recent evidence points to the fact that these headlines may be false alarms, which is good news for those interested in investing in properties featuring commercial leases in Los Angeles.

One reason why investors may not need to worry too much about the current economic conditions is that overbuilding -- which usually precedes a recession -- is not occurring at the moment. During 2018's fourth quarter, the construction of commercial buildings was only 1.3 percent of gross domestic product. In fact, it has not been at or above average since back in 2008.

Breweries are like industrial properties with commercial leases

The market for nonresidential properties in Los Angeles and other parts of the country continues to experience demand in general. However, industrial properties, including those with commercial leases, are especially drawing more attention -- specifically among craft breweries.  This is because a growing number of individuals are showing interest in eating food and drinking beer on industrial estates.

According to business owners in the brewery industry, customers enjoy the opportunity to drink their beer while seeing how their beer is being made in an industrial building. Customers also enjoy the experience of trying to find the industrial property when it is off the beaten path, as this is akin to going on a treasure hunt. For this reason, more bar owners may turn to industrial properties to house their business operations.

Investors with commercial leases can protect investments

Over the past several months, some analysts that asserted that the market for non-residential properties may experience a decline. In such a situation, those who own properties featuring commercial leases, as well as other types of commercial properties, may find their properties losing value. However, they can make a couple of moves now in Los Angeles and elsewhere to keep their investments protected in the event of a future market downturn.

First, investors might want to assess their portfolios to see if they have any buildings that are no longer in alignment with their investment goals long term. If they do discover some unnecessary assets, they can simply sell them. Right now is possibly a great time to unload commercial properties because the market is still active. In fact, investors can execute 1031 exchanges, where they can legally sell properties and then reinvest the transactions' proceeds in new properties, deferring capital gains taxes.

Market of properties with commercial leases impacted by news

In recent months, several national events on the news have been affecting the economy and property investments in the United States, including in Los Angeles. Such events include trade wars, climbing interest rates and the federal government shutdown. Technology has also been advancing at rapid speeds. Considering the circumstances, those interested in investing in properties featuring commercial leases may feel uneasy about the real estate market. However, they can protect themselves financially in a couple of ways.

First, it might behoove investors to take a second look at the tenants they are currently serving. The reality is that many tenants today no longer want leases that span a decade or more. Instead, they feel more comfortable with shorter-term leases, given the uncertainty of the modern business market. If investors provide shorter-term leases going forward, they may find themselves with higher net incomes in the months and years ahead.

Buyers may soon have more opportunities in the LA market

It is difficult, if not impossible, to find property in Los Angeles that is in the exact right location and within your budget. The LA market is among the most expensive in the country, but the market could be shifting soon. If you have been hoping to buy, your chance may be coming in the near future.

You may find it difficult to think of LA as a true buyers market. After all, homes are typically eight times more than the median income. However, there are more homes currently on the market. More homes means less competition among buyers, and that, in turn, means that homes will likely not sell above asking price. It may soon be a prime opportunity to make a purchase if that is what you have been hoping to do.

Location wise to consider for properties with commercial leases

A critical part of purchasing non-residential properties is figuring out which locations are the best to choose. This is because investors who buy properties featuring commercial leases that are located in subpar areas may find it difficult to market that property to renters or buyers in the future. Here is a glimpse at what investors in Los Angeles and other parts of California can do to make sure that they choose the right property locations.

First, it may not be a bad idea to look at properties in smaller towns -- specifically towns that serve as county seats. Even though these towns may be rural, government workers often bolster their populations, potentially even doubling them. Likewise, towns that have robust manufacturing plants may be good areas to do property searches. These lower-profile locations may be beneficial for investors because they feature less competition than bustling cities do. As a result, their properties will stick out more there.

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