Income-Producing Real-Estate Transactions

What Are Income-Producing Real-Estate Transactions?

Income-producing real-estate transactions involve purchasing assets that generate returns. Buying such an asset is a form of property investment, intended to generate regular cash flow and ongoing passive rental income.

Income-producing real estate is a world of its own. Assets may be residential — apartments and houses, or commercial — including offices, shops and industrial facilities. They may also consist of land available for residential development, commerce, industry or tourism, and agricultural land not immediately available for construction but intended for future rezoning.

What Characterizes Income-Producing Real-Estate Transactions?

Purchasing income-producing investment property is complex, for two main reasons:

First, these transactions involve substantial capital investment, often comprising investors’ best funds or most of their savings. They are therefore significant, weighty and consequential transactions, where any mistake can cause distress and heavy financial losses lasting many years.

Second, real-estate contracts generally contain numerous provisions written in legal language that lay investors do not understand. Purchasing and leasing income-producing property generally involves several parties, including the original owner, the prospective buyer, the contractor or developer, the construction company and, of course, tenants.

Given the financial and legal complexity, professional legal services should be retained to protect investors’ interests. A professional team including a qualified lawyer specializing in property, real estate and investments, and an economist assessing returns and financial risks, provides suitable advice and assistance for a sound, informed and worthwhile transaction.

Why Is Professional Support Important?

Lawyers possess relevant planning and construction expertise, understand real-estate and land law, and know the intricacies of property transactions. A real-estate economist can calculate financial relationships between acquisition and maintenance costs and property income, and has professional tools to advise each investor on appropriate risk limits.

First, professional assistance helps clients identify a quality property investment matching their goals and objectives, as well as their economic and financial means. A firm specializing in income-producing real estate can help identify an attractively priced asset with high yield and appreciation potential, while assessing feasibility and profitability.

Second, professional services help clients identify financing options suitable for the particular investment, and advise on the implications of financing, mortgages and funding risks.

Third, legal support is essential for drafting, preparing and signing purchase and lease agreements for the asset. The lawyer verifies every legal aspect, including ownership, the property’s legal status, tax exposure and anything affecting the transaction’s cost and profitability.

Fourth, a law firm can assist with management, maintenance and ongoing administration, including collecting rent and finding future buyers.

In conclusion: advice and support for income-producing real-estate transactions help clients make the safest, most informed and appropriate investment possible, reducing risk, increasing certainty and improving the prospect of success.

*(A. Shiloh & Co. Law Offices has supported real-estate transactions since 1955 and includes an economics department assisting clients with related financial issues)