Tami Michaels re Mayor Nickels & Multi-Family Design Standards

Home Improvement Radio Expert Seattle 770 KTTHTomorrow morning, Saturday July 26th, at 11:00 a.m., a representative of the Seattle Mayor’s Office will be On Air with Tami Michaels.  The show will be devoted to Mayor Nickels proposed changes to multi-family zoned construction (original announcement from the Mayor’s Office).

And more details about Tami’s show tomorrow here.

Tami called me before I left for Inman Connect to discuss this topic, specifically with regard to regulations that could increase costs for builders and consumers at a time when the housing market is weakening.  The discussion led to the age old question “Can government dictate taste in housing style?”

I have had many discussions over the years with various municipalities regarding this topic, and they all hinge on this quote from City Councilmember, Sally Clark “The mayor and I have both heard a lot lately about how growth is affecting our neighborhoods, not all of it is positive…”

Over the span of my 18 plus years in real estate in various places on both Coasts, I have become involved with this issue from time to time, and EVERY time it boils down to nothing happening except a bunch of controversy with little to no satisfactory result.  I have been to several “town meetings” where everyone who was griping was invited to attend and participate in discussions to improve whatever everyone “wanted” or was griping about.  Each time what became apparent as a result of these meetings is that you can never get everyone to agree, and sometimes you can’t even get people to attend the meetings!!!  It’s one thing to hang around griping about change, it’s quite another to be asked to get involved in a viable solution.

So I ask anyone who thinks they might have something to add to the discussion regarding proposed changes to multi-family zoned building projects in Seattle, to head on over to Tami Michaels’ post and add a comment.  I’m going to listen to tomorrow’s radio show and gather more info before commenting.  Maybe you would like Free Flushes to become mandatory…maybe not.

Anyone involved in Seattle Real Estate, or residents who have something to add about townhomes or the proposal in general, should tune in tomorrow at 11:00. “The changes would affect the 10 percent of the city zoned for multifamily construction, from low-rise development throughout the city to high-rise residential towers on First Hill. The change is heralded by the Mayor’s Office as “… the first major update to multifamily zoning in Seattle in 20 years.”

Don’t let a once in 20 years change pass by, without at least craning your neck to take a peek at what it’s all about.

What makes Commercial Real Estate Different from Residential Real Estate?

(Editor’s Note: I recently came across an interesting blog put together by Stephen Cugier and Nick Papa from Grubb & Ellis that focuses on Seattle’s commercial real estate market. In talking with them, I thought it would be interesting to have them post an occasional article on aspects of commercial real estate that might be of interest to people who generally follow the residential side of things. This first post by Nick will likely be particularly interesting for investors thinking of expanding into commercial real estate. )

The fundamental difference between commercial and residential real estate is the fact that all commercial properties are potentially income producing while most homes are occupied by their owners. While you can obviously purchase a home and rent it out, it is not considered commercial real estate. The four main product types that comprise commercial real estate are office, industrial, multi family (apartment) and retail properties. There are other commercial property types such as hotel/motel or mobile home parks, but these are the primary products and those that an individual investor might consider investing in.

Each product type has its pluses and minuses depending on a variety of factors including, but not limited to the management of the property, the size of the investment and amount of inventory available. Naturally the value of any particular property is also subject to typical market conditions such as location, physical attributes and current demand for that type of product.

For most investors entering the marketplace who have owned residential properties that they have rented out, multi-family is where they feel most comfortable. The benefit to these investors is that multi-family properties tend to be the most attainable commercial properties because you can start with something simple like a duplex and go up from there. One note here; apartment property five units and larger comes with much stricter financing requiring a higher LTV (loan-to-value) ratio while duplexes to fourplexes can be purchased within single-family financing parameters. Apartment properties also allow owners to save money on property management fees by maintaining and managing the properties themselves, typically for buildings less than 10 units.

Office, industrial and retail properties typically require a greater amount of initial investment because it is more difficult to find smaller properties (i.e. less than $1M) to purchase. These types of properties also require, in most cases, some form of professional management. This is because negotiating commercial leases with businesses is much more complicated and difficult than negotiating leases with individuals in rental property. This element can also be a benefit as it allows the investor to simply purchase and monitor their property without having to deal with the day-to-day hassles of management. These types of investments can be very attractive when there is a solid long-term tenant in place or where there is potential to substantially increase rents on the property.

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One other factor that needs to be mentioned in this discussion is IRS Code 1031. This part of the tax code allows owners of commercial property to defer the payment of capital gains taxes when they sell an investment property as long as they purchase a property of greater value within 180 days. This is very common in commercial real estate and is a great way for an investor to increase their real estate holdings and as a vehicle to gain tax free cash while leveraging their real estate assets.

If you do consider commercial real estate as an owner or user, it is best to work with trained commercial specialists. They can help guide you through the complicated process of identifying and purchasing (or leasing); which often entails working through proposals, offers and considerable analysis. Commercial specialists often know of unlisted properties that may be available through their network of landlord and owner contacts. They are also a great resource in assessing the financial viability of properties, which ultimately will determine their worth as an investment.