How Owning A Post Office Property Works
For those of you who might be confused about how you can profit from owning a leased U.S. Post Office property, let us try to give you a simple view of how it works.
As with investing in any piece of real estate there are advantages not found in other types of investments, namely:
- Owning something tangible, a building and land, not some paper that can become worthless, something that will always have some sort of value and be of use for someone;
- The tax advantage of being able to keep your profits (and not pay capital gains taxes on them) from the sale of real estate provided you re-invest that money into other 'like-kind' real estate within a certain period of time;
- Most likely a solid real estate investment will appreciate over time;
- The ability to collect rental income from a tenant that should cover your mortgage costs, insurance and maintenance upkeep (essentially someone else is paying off your investment).
Owning a US Postal Service property has several other advantages not seen in most commercial real estate investments. Many people who have invested in real estate for years never knew that most US Postal Service occupied buildings were not owned by the government but leased to them by owners/investors. Most, but not all, post offices have been designed for use by the postal service.
When the US Postal Service decides they need a post office building but there is no suitable existing space they send a site person to the area and that person then takes an option to buy the land. Then through a bidding process a contractor, who has been approved by the postal service, makes a bid by filling in a blank USPS lease form with their proposed rental rates, terms and conditions. The USPS then chooses one of the builders to build the facility to the USPS specifications. The successful contractor/bidder then has to buy the land under the terms of the USPS option to purchase the site. The base, or initial, term of the lease is generally 10, 15 or 20 years with a series of 5 year options. The lease can have various riders and amendments and these affect the value of the investment.
The main advantage of buying a post office is that you are buying the property 'fee simple', meaning that you own the land and the building but you are also buying the rights as the landlord to take over the lease with the US Postal Service being the tenant. The USPS has what are called leasehold rights and as they are the ones that have drawn up the leases they tend to favor the postal service in as many ways as they can figure out to give them the advantage. However, having them as a tenant means the rent is US Government backed and guaranteed as the USPS budgets, even if in the negative, as supplemented by the Federal Government.
For more information about the investment opportunities vailable in this area please feel free to contact us.
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