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The Commercial Real Estate Hour On KHTS: Why Invest In Commercial Real Estate?

During a recent “Commercial Real Estate Hour” on KHTS, Host Jesus Henao of Leola Commercial, Inc. explained the No. 1 reason people typically invest in commercial real estate.


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While many individuals think of residential property when it comes to real estate investments, Henao explained that commercial properties — such as office buildings, shopping centers, industrial areas, etc. — have a unique benefit known as depreciation.

“The main reason people buy these is simply for the cash-on-cash return, and then something else that’s called depreciation,” he said.

Related: ‘The Commercial Real Estate Hour’ Debuts On KHTS With Guest From Newhall Crossings Project

A commercial property depreciates to a value of zero in the eyes of the IRS over 39 years due to normal wear and tear of the building, not including the value of the land, according to Henao.

This means that a commercial property purchased for $10 million with a land value of $2 million leaves a total of $8 million to depreciate over the 39-year span allotted by the IRS.

“In 39 years, the government says my building is worth $0 because I’ve depreciated, so I take $8 million and I divide it by 39. That means I get to write off $250,000 a year,” Henao explained.

In addition, if the commercial property holder is leasing out the building to a business, they do not have to pay taxes on the income they collect from rent every year, Henao noted.

“(If) at the end of the year, I’m collecting $180,000 (in rent) from Starbucks… I would pay zero taxes on that income,” he said. “So I take that $180,000, I put it in my pocket and we all go to Disneyland.”

The benefits of depreciation can also be combined with writing off the interest payments on the loan used to purchase the commercial building in the first place, according to Henao.

“Isn’t that a good deal?” he said. “So that’s how depreciation works — that’s why people invest in real estate.”

Ed. Note: This article is a KHTS Community Spotlight based on the latest “The Commercial Real Estate Hour” with Leola Commercial, Inc.

Leola Commercial, Inc.

26575 Ruether Ave 2nd Floor

Santa Clarita, CA 91350

(818) 570-3301

Leola Commercial, Inc. is a boutique Santa Clarita commercial real estate firm that specializes in the sale of multi-family apartments, land for development, retail real estate, senior housing, tax credit properties, industrial, NNN and office. Headed by Jesus Henao, the Santa Clarita real estate firm prides itself on maintaining “old world” customer service principles and personalized representation. Henao is also the host of “The Commercial Real Estate Hour” on KHTS Mondays at noon.

Leola Commercial, Inc. – Santa Clarita

https://www.youtube.com/watch?v=Z_0uM5r0RWo

Leola Commercial Inc., Commercial Real Estate, Multi-Family Apartments, Santa Clarita Commercial Real Estate, Land for Development, NNN, Retail Real Estate, Santa Clarita Real Estate

KHTS FM 98.1 & AM 1220 - Santa Clarita News - Santa Clarita Radio

The Commercial Real Estate Hour On KHTS: Why Invest In Commercial Real Estate?

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