Real estate investors in many (most?) of the nation’s markets have been held hostage since the infamous busting of the mother of all bubbles. For the first time since I can remember, properties in a buncha these markets can now be sold in a relatively reasonable time. Still, for a majority of folks, encumbered properties possess to little equity to matter. For those who own free ‘n clear, it might be time to get while the gettin’s good. I’ve been seeing this emerge the last few months. What’s better for a lotta of ’em is that they can sell their debt free properties without the necessity of a tax deferred exchange — they’re still sellin’ at a loss. If you now find yourself in this position, smile. It’s possible you’ve been given the recipe to make some pretty tasty lemonade from those lemons you’ve been hoarding. 🙂
Imagine finally being able to dump investment properties — albeit for a loss, sorry — but resulting in enough cash for you to get outa Dodge with enough do-re-mi not only to reinvest, but in a far superior market. Live ‘n learn, right?
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Here’s a Real Life Example.
Mike’s real estate investment portfolio has a few props in a market just now comin’ alive. He likes a different region of the country far more. He’s tried to sell before, but with cruddy results — not even a bad offer. Last week though, he put a test property on the market, and it sold quickly. He’d priced it right, so wasn’t surprised. He’ll now have enough net cash — none of it taxable — to acquire a much nicer property with more units. On so many levels it’s truly an escape. But wait, there’s more.
Due to the fact he was able to make the move without resorting to Section 1031 (tax deferred exchange), his new acquisition(s) will not be weighed down by the baggage of adjusted cost basis and significantly reduced depreciation. Those two factors, which Mike avoided completely, are huge. Adjusted cost basis could’ve resulted in future capital gains taxes being much larger. Also, since the original cost basis on the newly acquired property(s) will be what he paid, unaffected by 1031 ‘baggage’, the resulting enlarged annual depreciation numbers will shelter far more annual cash flow. In fact, it’ll likely be enough to allow future increases in cash flow to be covered.
This could be your Get-Out-Of-Jail-Free card. We don’t know how long this more friendly market will last, so don’t kid yourself about the time you may have to make things happen. Windows open and they close. If you recognize yourself in Mike’s scenario, explore selling your property(s) and movin’ ’em to a region better suited for the long term.