Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Commercial real estate question
Old 11-03-2018, 02:14 PM   #1
Recycles dryer sheets
 
Join Date: Sep 2018
Posts: 147
Commercial real estate question

I have not seen this question here so I wanted to get opinions.



I am a limited partner in a LLC with commercial real estate that is family owned and generates about $10 k /year. It has had Consistent performance for the past 10 years.

How would the funds be calculated for estimating retirement income ?

equity ? but it is not liquid. Fixed income like a bond ?

what Is the correct assumption ?
__________________

Octogirl is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 11-04-2018, 10:21 AM   #2
Thinks s/he gets paid by the post
 
Join Date: Jun 2016
Posts: 3,060
I have hard money loans that have been generating over 8% every year. I consider them similar to junk bonds - higher yield than most fixed income investments, but more risky than the average investment grade bond.
__________________

Scuba is offline   Reply With Quote
Old 11-04-2018, 10:39 AM   #3
Recycles dryer sheets
 
Join Date: May 2013
Posts: 475
Quote:
Originally Posted by Octogirl View Post
I have not seen this question here so I wanted to get opinions.



I am a limited partner in a LLC with commercial real estate that is family owned and generates about $10 k /year. It has had Consistent performance for the past 10 years.

How would the funds be calculated for estimating retirement income ?

equity ? but it is not liquid. Fixed income like a bond ?

what Is the correct assumption ?
Are you asking how to allocate it on your balance sheet, i.e. what line item, or are you asking how to calculate the reliability of the income moving forward?

For the first question, I think it's fine to have a new category called "Real Estate" or "Hard Assets" that's distinct from stocks and bonds.

Regarding how to calculate the income on a go-forward basis, there's not a lot of info but my guess is that you're part of a group that owns some sort of commercial building with a tenant. If that's the case, the occupancy of the building is either 100% (the tenant is there paying rent) or 0% (the tenant leaves and you need to find a new one.) If the latter event, it can take a LONG time to replace a tenant in commercial property, and while waiting you have the joy of paying property taxes, utilities, upkeep, etc.

It's no surprise that income has been stable for 10 years...that entire time has been the "up leg" of the economic cycle. But once the "down leg" hits, we don't know how your investment will perform since we haven't gotten there yet.

If it were me and I was getting $10k a year, I'd project that going forward I'll earn half, i.e. $5,000. In years when you make $10k, save half of it for the rainy day fund. My two cents.
__________________
Saved 8 figures by my mid-40's as a professional bubble-spotter. Beware...the Fed creates bubble after bubble after bubble.
RenoJay is offline   Reply With Quote
Old 11-04-2018, 12:50 PM   #4
Thinks s/he gets paid by the post
 
Join Date: Dec 2014
Location: Huntsville, AL/Helen, GA
Posts: 3,766
I really don't understand your questions. But let me say something about a partnership I was involved in.

I inherited partial ownership in an old real estate partnership. At one time, they owned apartments and other properties, but it's now essentially ownership of a 10 story office building with no tenant turnover. My partners were in their 80's and 90's and a couple of partners inherited their share from their fathers.

I had no desire to stay in the partnership since I didn't even know my partners. But my partners preferred to keep me, a stranger, in the partnership rather than coming up with personal funds (cash) to buy out my share of the partnership.

When it was said and done, we had to get attorneys to negotiate a buyout. My partners were CPAs and attorneys, and I would assume the building was heavily depreciated--worth more than they'd admit. But there again, my interest wasn't worth the expense of a drawn out legal battle.

The lesson is that every business and partnership has a natural lifespan. And even when families are involved, partnerships need to be for set periods of time. Then the partnership needs to be split and everyone go amongst their own way. Partners are not going to live forever, and the threat of arguments over dead partners' interests are just not worth it.
Bamaman is offline   Reply With Quote
Old 11-04-2018, 01:50 PM   #5
Recycles dryer sheets
 
Join Date: Sep 2018
Posts: 147
Thank you Scuba, RenoJay, Bamaman - you have all given me information I need to think about moving forward.

My goal was to understand calculation of the reliability of the income moving forward. This is property that was inherited through family and has multiple tenants with small local businesses. Selling will require appraisals & attorneys, etc.

I still work full time (So I never count on this money) but as a I prepare to retire in 2020 would like to think about which "bucket" it belongs in.

I guess I will continue to "not count on the funds" and place it in my C Bucket of long term investment with risk.

Thanks for your advice.
Octogirl is offline   Reply With Quote
Old 11-04-2018, 03:49 PM   #6
Full time employment: Posting here.
Offgrid Organic Farmer's Avatar
 
Join Date: Feb 2018
Location: An Un-Organized Township of Maine
Posts: 577
I have owned rental property for a number of years. You say that this partnership pays you $10k/year. But who gets the depreciation each year?

Some one within the partnership is getting it. It might be interesting for you to learn who is getting it.
__________________
Retired at 42 and I have been enjoying retirement for 18 years [so far].
Offgrid Organic Farmer is offline   Reply With Quote
Old 11-04-2018, 06:16 PM   #7
Recycles dryer sheets
 
Join Date: Apr 2016
Posts: 128
Unless it's multi-family residential, commercial RE is all about the leases. Even if the lessee vacates the property, they must continue paying rent, taxes and maintenance through lease-end. Even if they go Ch 11 bankrupt, many BK courts rule that leases are operating expenses and must be maintained through the re-org.

Do you know the lease status? If it's a long-term retail, industrial, or other non-residential, the risk is substantially lower than you might think.
Bruceski44 is offline   Reply With Quote
Old 11-04-2018, 06:38 PM   #8
Thinks s/he gets paid by the post
 
Join Date: Jun 2016
Posts: 3,066
What does your K1 say? That will show how much you really are or are not making.
I own a building and only count a conservative estimate of equity as part of my nest egg. Income fluctuates.
__________________

COcheesehead is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Keep or Sell the Commercial Real Estate, please advise rkser FIRE and Money 9 11-16-2011 07:45 PM
Holding both commercial real estate and reits cashflo2u2 FIRE and Money 7 12-01-2010 09:57 PM
Interesting commercial real estate investing option... Andy R FIRE and Money 5 10-05-2007 10:38 AM
Commercial Real Estate BunsGettingFirm FIRE and Money 28 12-29-2006 04:36 PM

» Quick Links

 
All times are GMT -6. The time now is 04:31 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2019, vBulletin Solutions, Inc.
×