As a business, transaction and real estate lawyer at one of the largest law firms in Sioux Falls, Brendan Reilly has an insider’s vantage point in a key sector of the area’s economy.

Reilly, a partner at Davenport, Evans, Hurwitz & Smith, is a player in this new era of commercial leasing – an important reflector of local economic activity – on both the landlord and tenant sides of deals.

He sees opportunities and burdens on both sides. But tough market conditions, including high vacancy rates in commercial buildings, have created opportunities especially for tenants.

“It’s kind of a buyer’s market right now. It’s kind of the same in leasing. It’s a tenant’s market right now,” he says.

Landlords want tenants, but business tenants can shop around and look for bargains.

In addition to reduced lease rates, prospective tenants might find landlords are more willing than in the past to grant other enticements, such as a build-out allowance to help remodel space, Reilly says.

Depending on the space, landlords also might be willing to lock in a lease rate for a longer period without a built-in price increase.

Tenants, meanwhile, might face greater advance scrutiny from landlords.

Landlords have to take the due-diligence process especially serious during challenging times because replacing unsuccessful tenants is expensive, Reilly says.

“You don’t want to give away the farm and have tenants that are unable to carry out the terms of the lease,” he says.

So, more so than a few years ago, landlords tend to want stronger financial guarantees built into leases, he says.

In the past, a landlord might have been willing to settle for the financial promise of a business entity. That left open the risk that if a business folded, no one was responsible for the remaining financial obligations.

These days, landlords often want the personal financial guarantee of a key shareholder of the business as well as the promise of the limited liability company or other legal entity, Reilly says.

Reilly, who’s been practicing business law for 12 years, says legal work flows with the market. If development is slow, work related to filling existing space might require more attention.

If real estate agents are busy, business lawyers will be busy, too. So Reilly is a cheerleader for the commercial real estate industry.

“The market hasn’t stopped. It’s slowed. Maybe the focus has changed,” he says.

Behind-the-scenes business activity is up, compared to six or nine months ago, however.

“I think in Sioux Falls we’ve hit rock bottom, and we’re on the way back up,” Reilly says.

Rob Swenson can be reached at rswenson@sfbusinessjournal.com.

By checking with MidAmerican, you can find out which rate you are on.  Rate “MVF” is available for residential, commercial, and industrial customers, but costs more than rate “SVF.”  Rate “SVF” is available to residential, commercial, and industrial customers who have peak day requirements of less than 500 therms.  If you call MidAmerican’s customer service line at 800-329-6261, you can review your rates and decide if this is a switch that may help you too.

One business recently reported that by asking MidAmerican to change their rate to the “SVF” rate plan, they will save over $300 a year!   

Joann Messersmith is the Book Keeper for Legacy Real Estate.  She is responsible for the accounting for all property management, communicating financial information to owners, and processing payroll for the staff.  With over 15 years of experience and a bachelor’s degree in business management, Joann brings knowledge that benefits the clients and customers of Legacy Real Estate.  She enjoys the fast pace and varied work that comes with this industry.  When not in the office, you can find Joann out with her horses, as she is an avid dressage and hunter/jumper rider and competitor.  You can reach Joann at 605-336-7376 or via email.

The days of searching through the classifieds of the local paper are almost a thing of the past. Most folks are apartment hunting online.

If you think looking for an apartment seems to be overwhelming, never fear.  The internet has made the process so much simpler.

Here are some of the most commonly used apartment hunting tips and ideas: 

1.  Craigslist: this is my personal favorite. It is the simplest way to seach for an apartment in our city. Just point and click on the heading Apt / Housing listed under the Housing section. Look for ads that have full descriptions and plenty of pictures, to narrow down your choices, before calling the rental company.

2.  There are many apartment finding websites that make it very easy for you to look for an apartment online. Signing up with an apartment finder website such as Apartment.com or Forrent.com is a good way to expand your search for apartments. Most of the websites have floor plans, photos and contact information.

3.  Based on your research, call the apartments that you are interested in checking out. Be prepared to fill out applications and pay an application fee. Most Apartment Managers will run your credit and background information. Check your credit with the big three credit agencies. It might save you time to bring a copy of your current credit report along with your application. If anything is an eyesore on your credit report, now is the time to explain the situation to the leasing agent. Hopefully the leasing agent will be able to provide guidance based on your credit report. 

Michael Fox is the Property Management Director for Legacy Real Estate.  His expertise in daily operations and client relations enable him to meet and exceed the expectations of clients.  Michael is responsible for all 15 residential apartment complexes in addition to the many private homes that are leased through Legacy Real Estate and takes pride in finding just the right place for you to call home.  Michael’s excellent customer service and management skills have been utilized in several industries including past responsibilities as store manager, and as chief operations officer for several hotels and has recently work as chief of operations in human resources in the financial industry. He has now found his niche with real estate at a company with high standards of quality and customer service as their focus. Additionally, he will soon be completing the requirements for his brokerage license.  Contact Michael @605-336-7376 or via email.

The 1031 tax deferred treatment of capital gains is one of the best real estate investor vehicles for preserving and building real estate wealth.

Six important factors in 1031 exchanges.

1.  Both your former property (relinquished property) and your new property or (replacement property) must qualify as a 1031 property.

2. You have 45 days to prepare a list of properties to buy.

3. You have 180 days to close on the purchase of one or more of the properties on your 45-day list.

4. You may not touch the money.  Typically, a QI or (Qualified Intermediary) holds the money.

5. The holder of title to both the relinquished property and the replacement property must be the same.

6.  In general, you must equalize the debt on the relinquished property and your replacement property.

What qualifies for a 1031 exchange?

It must be property that is held for investment, or used in a trade or business.

Are there time requirements?

In order to defer the tax on your 1031 exchange you must meet two time line requirements.

Within 45 days of closing of the relinquished property, you must prepare a form identifying the property you want to acquire.  To be safe, you want to identify more than one property, but not more than three.  This document is given to your Qualified Intermediary.  Failure to do so will disallow your exchange.

Within 180 days of the closing of your relinquished property you must purchase and close on one or more of the properties listed on your 45-day form.  Failure to close on one of these properties before the 180 day period will disallow your exchange.

Who is a Qualified Intermediary?

 A Qualified Intermediary, (QI) is required by the IRS during the exchange process.  They hold your money during the 1031 Exchange.

 Most Title Companies offer this service.  They hold and disburse the money during the exchange process.  Verify with the Title Company the funds will be placed in an interest bearing account. A million dollars resting in a 3% interest bearing account for 180 days can accumulate to $15,000; this is well worth asking the question.

 Your attorney, accountant, real estate agent or broker, etc. may not be the QI.  The QI must remain an independent third party.

 What title/ownership issues should be considered?

 In general, the title to the replacement property has to be the same as the title to your relinquished property.  ABC Corporation sells relinquished property; ABC needs to acquire the replacement property.

 What about debt?

 Generally, the debt on the replacement property must equal or exceed the debt on the relinquished property.  There are exceptions, receiving cash or (boot) in the real estate exchange does not defeat the 1031 exchange.  You will pay a taxable gain on the money you receive in the transaction.

 These are the basics in a 1031 exchange, however, there are many other avenues and angles to approach an exchange I have not addressed.  The tax advantages to conducting a 1031 exchange on your investment property are well worth your time to consider.  Rather than facing a large tax bill, consider the deferred exchange and utilize the saved tax dollars to produce income and additional wealth for you and your legacy.

If you have any questions, or are considering selling your investment property, contact me to evaluate your options and preserve your wealth.

Dave Hasvold is a Broker Associate with Legacy Real Estate. He grew up in Sioux Falls and graduated from SDSU with a BS in Commercial Economics. After graduating from college Dave moved to Kansas City, there he owned and managed a Best Western motel for twelve years. Dave sold his motel and purchased a retail strip mall in Sioux Falls, which he owns and manages today. He has over twenty years of commercial real estate and business ownership experience. Dave specializes in all aspects of commercial real estate; sales, leasing and investments. He enjoys helping his clients make informed decisions for a smooth transition into their new business venture. Dave enjoys jet skiing, snow skiing, motorcycle riding, golf and family time. Dave is a member of the Sioux Falls Chamber of Commerce and Sioux Valley Cycle Club. Contact Dave at 605.336.7376 or email him.

Now more than ever, it is critical your management company works a targeted plan to fill vacancies and maintain top-notch customer service for the existing tenants. Management companies must think outside the box and be willing to implement new processes and offerings setting them apart from others in the rental industry. There are several facets to this and the following is by no means inclusive of everything that can be done, however, here are a few key items that can make all the difference in your property’s vacancy rate.

Communication: In any organization, clear communication is critical to success. Your management company should periodically let you know how they are doing, and allow you to ask questions, express concerns and provide suggestions. Some of the best ideas I’ve had regarding marketing, property improvements and other lease-up strategies have come from owner-clients. Your management company’s willingness to keep an open mind and share their successes and failures demonstrates not only their attention to your property but the ability to change and evolve with the rental market.

Likewise, communication with tenants is another critical component to stellar management. Retaining tenants, addressing problems and questions in a timely fashion, and asking for tenant feedback are all important to managing your property. Sending out tenant surveys, secret shopping employees, and tenant events are all great ways to keep the lines of communication open so tenants know they are heard. The smallest thing can have a significant impact on tenant satisfaction. A fresh coat of paint, clean carpets, a new light fixture, all are relatively inexpensive improvements that benefit the value of your asset and demonstrate to tenants that management and owners care. And the costs of these items most likely outweigh the turn over costs incurred for advertising and re-renting the unit.

Marketing: Make certain your management company has a system that tracks activity, providing feedback on marketing tools, advertising and the closing rate of the rental agents. Does the advertising your management company schedules reflect where the leads come from? If 80-90% of traffic comes from drive-by and/or internet is there appropriate signage in front of the building? Are all the internet advertisements updated and current? Has the management company looked for other sites to supplement their internet presence? In many markets, newspaper and other print media have drastically fallen to the wayside as a vehicle to recruit tenants. Ramping up your property’s internet presence is crucial. Look to sources such as Google ad words, facebook, linkedIn, local rental web sites, craigslist and other internet sites. One of the best parts of advertising on the internet is it is inexpensive, if not free in some circumstances.

Incentives and “Free Rent”: When vacancy rates soar, tenants have a huge selection of properties to choose from. Many properties offer huge rent discounts, free rent, upgrades like paint, garages or appliances and other incentives to lure new tenants. Customers are savvy when shopping for their next apartment and ask for these things up front and use their position to negotiate the best deal for their budget and needs.

For management companies, the solution can be two-fold. One, your management company should make the effort to be top-of-mind when tenants are looking for a place to live. And second, management companies need to sell prospective tenants when showing them your property. This takes a combination of stellar sales technique and the right combination of meeting their needs and/or offering incentives to close the sale. Too many times inexperienced leasing agents throw out the incentive before they know what the prospect needs or wants. Finding the unit first, asking the right questions and then offering an incentive to close the deal will ultimately result in higher closing ratios and a tenant who is convinced of the value of the features and amenities of the property.

Ultimately, as an owner, you need to choose a management company you feel comfortable with, one you can communicate with–ask the questions and get relevant answers. Make sure your management company is paying attention to marketing the property and that they track the traffic to your property. Training their employees on how to sell and when to offer incentives is another critical component. If you aren’t satisfied with the answers or the results, it’s time to re-examine your management strategy. Your management company works for you, make sure they are committed to managing your investment as if it were their own.

Jennifer Fleming is Broker Associate and co-owner of Legacy Real Estate. Her expertise lies in commercial and residential brokerage, real estate investment, historic redevelopment, development, and property management. Jennifer possesses an extensive knowledge of Sioux Falls market conditions and is experienced in historic renovation and Historic Tax Credit programs, lofts and downtown development. Jennifer leads the Legacy team of brokers, property managers and support staff. Jennifer has a BS from South Dakota State University and is a member or Sioux Valley Optimists, Women in Networking and other local service organizations. Contact Jennifer @ 605.376.1308, via  Email or View Jennifer Fleming’s profile.

Buying a business is arguably the best way to become your own boss. Starting a business from scratch or buying a franchise are other possibilities, but only buying an existing, successful business provides an immediate cash flow to get your feet on the ground and running.

Although there are many good businesses for sale, there are several critical steps you must follow to be certain you buy the right one, the first time.

1. People who are serious about being in business for themselves have to realize that they will be the proverbial “chief cook and bottle washer”.  Too many prospective business owners want to be the CEO of the business.   Being the CEO of your own business does not mean that you sit behind a big desk and plan on how to spend the monies.  It means you will be doing everything possible that needs to be done to run the business.
2. Prospective business buyers must understand that they will be buying some else’s “baby”.  A business that another person has built, nurtured, developed and has spent many hours, many hours making it work.  It may be important to the present owner that they feel comfortable with a potential new owner since their reputation will be somewhat still associated with the new owner in the eyes of the customers.  The buyer needs to consider who they are in the eyes of the prospective seller.
3. Buyers should not begin the business buying process unless they have the necessary funds or know exactly there they will come from.  Bankers are a lot tougher on providing business financing and the term “blue sky” is no longer in their vocabulary.  Stricter loan requirements, higher buyer cash down and other economic impacts all have changed the way someone purchases an existing business.  Know how much cash you can contribute and how much you will need to finance and research your options out well in advance, so when the right opportunity arises, you are financially sound and ready to buy.
4. Buyers think that when businesses are enjoying good times, they are overpriced and when economic times are not as good, they want to buy a business for far less than what it is worth.  Timing works both ways and there is a right time to buy and a right time to sell.  When it is right for both the buyer and the seller, it’s the right time.
5. There are no sure things in life or business.  There will always be a risk when buying a business.  Buying the right business usually takes time, energy and patience.  However, one can’t be a procrastinator – when the right business ownership opportunity comes along, you must be ready to act.

Buying your own business is a serious step in your future –seek professional help to assist you in navigating through the details of purchasing a business.  By owning your own business, you help in providing jobs for other people in your community and add significant value to their lives as well as yours and your family.   Small business owners own and operate the local businesses that provide the goods and services that add to the richness of our life everyday. So what are you waiting for?

Kristi Leisinger is a Broker Associate with Legacy Real Estate specializing in Business Brokerage. She enjoys putting people together that share a common bond or need. Her strong work ethic and passion is foundational by shaking hands and building relationships. She is a good listener to reach the objectives of her clients and is a trusted professional to build lifetime relationships. Her background includes over 20+ years in the healthcare industry including medical administration, business development and medical sales. She has her bachelor’s degree in Health Services Administration and her MBA from the University of Sioux Falls. She is actively involved in Junior Achievement, Sioux Falls Chamber of Commerce, SME of Sioux Falls, Sioux Falls Business and Professional Women, Sioux Valley Optimist and National Association of Female Executives.

To contact Kristi call 605.321.2992 or email.