Changing Real Estate Market Could Boost Demand For 1031 Exchanges
The changing real estate market is increasing the need to minimize capital gains taxes.
The need to limit exposure to capital gains tax, and increasing awareness of 1031 exchanges is likely bolstering demand for experts in this area. What factors are driving this trend, and where can property owners find the best help?
Rising Property Values
Nationally, real estate values have rebounded incredibly well over the last six years. Some areas now may be experiencing prices above their peaks of 2006. These rapid gains can also expose property owners to equally large capital gains taxes when they sell. 1031 exchanges offer the ability to defer those taxes, and continue to reinvest their proceeds.
Many believe that property prices and rents are peaking, or have surpassed their new peaks in some cities. Zillow points to places like San Francisco, CA as an example of cities where these numbers are on the decline. For investors and corporate real estate asset managers this indicates a smart time to sell, and restructure portfolios. This is especially true with current overall demand remaining strong, and interest rates poised to rise and cramp cap rates. Many should be shifting to areas with more room for growth during the next phase of the market.
New Financial Needs
We are also at a pivotal time in history as record numbers of boomers head into retirement, and we experience one of the largest transfers of inter-generational wealth ever. These life changes may demand different investment strategies and different types of assets. For example; investors may desire real estate assets which are more easily managed for themselves and heirs, and may prize passive income and wealth preservation over growth potential.
Connecting with 1031 Service Providers
With 1031s in hot demand, it is important for investors and property owners to seek out great quality service providers early. Look for established legal and tax professionals with good reputations, versus those just starting out to capitalize in the surge in business in this arena. Stat building a relationship early so that they are available to help you when you need it, and you won’t have to settle for subpar service from someone else.