Q: I have a friend who is trying to talk me into going in with him on an investment property here on Vashon.

We are looking at buying a rental house or some commercial property. The trouble is that none of these have a good CAP rate, or monthly return on the money. Rents are too low. Why should I stick my neck out?

A: I just returned from an annual conference that discussed this very issue. I heard presentations by leading real estate attorneys and commercial brokers who work for large regional companies, speaking about buying investment property. According to these experts; commercial, industrial and multi-family housing is selling faster than ever before. Rents are low right now but they will catch up. Most of their investors are going in with 40% to 60% down payments so that they have a positive cash flow while sitting on property that is expected to go up in value enormously in the next five years.

On Vashon Island many of the investors I've worked with are holding properties that have gone up between 60% to 150% in less than five years. That's hard to beat in any other form of investing. In addition, there are very attractive tax benefits to not only owning investment property, but having a negative cash flow to offset other income.

You can also trade property, tax free, using the 1031 exchange provisions of the IRS code. That way you can build up the value of your real estate portfolio by rolling over the profits on one or two properties into an even better property.

There's a lot of activity in our business and commercial sector right now. It's a good time to pick up well priced commercial and business property that will become even more valuable in the future. We have a very limited supply of commercially zoned property. As we continue to gentrify, that limited business property will only go up.