Texas Commerical Real Estate Investors Need to Be Aware of Cash Flow Interest
Loan Amortization
The largest advantage for the Texas commercial real estate investor is that the investment property’s tenants essentially pay for the amortization of the Texas commercial property’s mortgage. This is one of many benefits of owning commercial real estate properties in Texas. Remember, whether a property investor in Dallas or Houston is passive or active, it is important to remain vigilant of the ratio of interest to principal, as the debt service (loan payment) is nearly all interest and predominantly tax deductible at the beginning of the loan’s amortization.
Tax Deductible Interest
It is easy for a passive Texas investor to become too comfortable with the mixed-use or multi-unit commercial property’s initial positive cash flow. However, eroding interest payment will slowly disappear halfway into a three, five, seven, or ten-year commercial mortgage. If a passive Real Estate investor in San Antonio or Austin is not paying attention, the annual debt service will remain constant, but a great portion of the non-deductible principal will be paid while the tax-deductible interest will be reduced.