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What the tax bill may do to commercial real estate values

The Tax Cut and Jobs Act is widely considered to be positive legislation for the California commercial real estate industry. Specifically, it could lead to greater demand for multifamily properties throughout the country. It may also result in corporations spending more money on real estate holdings. However, some believe that too much demand could cause new problems for the commercial real estate landscape.

For instance, higher demand might lead to inflation. Inflation generally results in higher interest rates, and higher interest rates create less demand for existing properties. Of course, if demand continues to be strong, higher interest rates might not be an issue for the time being. This could occur because the bill may result in residents choosing to rent instead of purchasing a home. Furthermore, high demand could lead to too many properties being developed that may never be occupied.

It is not uncommon for commercial real estate investors and developers to borrow too much money and build too many properties. The new legislation was seen as an overall victory for those who hold commercial real estate. Commercial property owners can still deduct their full mortgage interest while also benefiting from a lower corporate tax rate. Those who hold property in a partnership get taxed at their personal rate with a 20 percent deduction for business costs.

While there are many advantages to owning commercial real estate, investors have to keep several factors in mind. In some cases, tenants may not pay their rent or otherwise create a burden for property owners. Those who are going through lease disputes or other problems with a tenant may want to talk with an attorney. Doing so could make it possible to resolve the matter in a manner favorable to a commercial real estate owner.

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