Recent questions from my real estate clients
“There are no stupid questions.” I can still remember my teacher from high school uttering those exact words. Having a clear understanding of the complexity of buying, selling, and leasing real estate will keep you out of easily avoidable situations.
Below are several recent questions asked of me by my clients.
I am buying a business, and there are six months remaining on the lease. Should I get a longer lease? Often having the right location will make or break a business. Buying an established business and then having to relocate could be detrimental. Also, your lease runs its course, and the landlord will not renew — what do you do? You could lose your business investment if you cannot renew the lease or secure another location.
Negotiating a lease extension with 12 months remaining in the current term is good practice. Corporate entities negotiate extensions with a few years remaining. For a small business, it would be wise to extend the lease for another three to five years and have the option to renew for another three to five years.
My parents are in their 80s, and my mother is experiencing mild dementia. They live in a large home alone, and I am afraid I need to change their living arrangements. Should they sell and move in with me or perhaps gift me their house so I can move in with them? I am very sorry your mother is experiencing dementia. It is so good they have you to help them through this time in their life. Selling their residence is an option. They would have a $500,000 IRS Section 121 capital gains exclusion, but that would undoubtedly be a life-changing event for you and them, with you now being their primary caregiver.
Be careful with them gifting their home to you. I am not an estate attorney or CPA, so be sure to check with one, but gifting their home to you will have tax consequences. You would lose the step-up in basis you would otherwise receive if you inherited the property. This scenario has many facets, so check in with a qualified professional.
Some families may be motivated to liquidate their parents’ estate before Medi-Cal kicks in. This strategy may not work as planned as Medi-Cal has historical criteria they consider in reviewing an estate. Meet with an attorney to understand your options.
I have a massage therapist tenant in my office building who is three months behind on her rent. She is making monthly partial payments but continues to get further behind. The current rent was reduced to lower than the original, and now she wants a smaller unit, so her rent will be even lower. Should I allow her to move into a smaller unit? It cannot be easy to secure a new tenant for office space in our area. I recommend you review her income and expenses to determine if she can pay the new lower rent. You can then work the unpaid balance at the latter end of the lease over and above the base rent. Also, have her agree that once she is late again, the lease will be terminated and the unit vacated. An earlier agreed-to promissory note is activated for the amount in arrears.
Burt M. Polson is the CEO of ACRESinfo.com, a commercial real estate brokerage company, can be reached at (707) 254–8000 or email burt@acresinfo.com.
