For a while now, commercial real estate professionals have been operating amid fears of a looming recession. And real estate in New York and New Jersey comes with its own specific issues. Here are some tips for real estate pros to stay prepared in an uncertain market.
Pay careful attention to tax planning.
Tax season is once again upon us, and it is of paramount importance that commercial real estate professionals pay extra attention to their tax planning. Make sure to get everyone in the accounting department on the same page. Ensure that all numbers are properly scrubbed, that bills have been sent out, collectibles have been addressed, receivables are in the queue and outstanding payables are taken care of.
Ensuring these items are in place will avoid issues when it comes time to submit taxes. This is especially important if you want to make any changes in your commercial real estate portfolio; you want to make sure everything is lined up.
Be aware of potential tax reorganization issues unique to New York and New Jersey.
New York state recently lost a congressional seat due to a dip in population. Many people are exiting New York because of the tax issues. New York is set to lose even more during this upcoming census. These shifts are small right now, but can influence political power and state legislation in the long term — so pay attention when 2020 census results come out.
Know the impact of rates and the stock market.
There is a lot of uncertainty regarding the stock market. Is the market discounting the fact that we are not going to war? What is that going to do to rates? The rates are still low, historically speaking, but continue to pay attention to these rates and market fluctuations. Stocks are too expensive and will crash at some point.
Specifically, pay attention to the 10-year bond and these rates.
Pay attention to the 10-year bond and these rates, which have a specific impact on the mortgage market because they are used for commercial-backed securities. Treasury yields only affect fixed-rate mortgages. The 10-year note affects 15-year conventional loans, while the 30-year bond affects 30-year loans. Essentially, the best time for a fixed-rate mortgage is when treasury yields are low.
Decide what to do with existing properties, and assess whether to purchase more.
Money may pour out of the stock market to commercial real estate when the market becomes more uncertain because investors are looking to achieve more consistent returns. Take a look at your existing properties and assets; assess them, and consider whether you want to add to your portfolio to get ahead of an impending uncertain market.
Something else to consider in this process is whether to sell your properties in New York and New Jersey and head to other states to avoid long-term tax repercussions. It is worth considering and speaking with trusted parties regarding what you are prioritizing in properties long term — the location and convenience of New York and New Jersey, or the lower prices of alternative states.