In the spring of 1999 I wrote, “The early phase of a bull market in real estate presents a great opportunity to trade your current property up into a property of higher value.” This was and is sound advice. Here we are in 2020 and there are even more great reasons to exercise a 1031 Tax Deferred Exchange. Here are just a few:
- Higher Equity to Income Properties
1031 Tax Deferred Exchanges on homes or condominiums that are wholly or substantially paid off can result in increased monthly cash flow, triple your rate of return, increase your depreciation and establish a path by which you can triple your retirement income in just ten years. In addition to these magnificent financial benefits, by hiring management to run your property, you’ll realize significant time savings. Call me and I will run through the figures and possibilities with you.
- Interest Rates
Interest rates are incredibly favorable for 1031 Exchanges, with variables that start at 3.5%. Hybrid loans which are fixed at first and then switch to variable also offer very attractive rates. There are even loan programs available that are fixed for 15 years, amortized over 30, and then have the balloon payment at the end. Borrow money when it is cheap!
- Availability of Properties
Many property owners are taking advantage of the all-time high prices of today’s market to sell their properties. Availability of high-quality property is very good.
- Re-position for the Echo Boom
Children of the Baby Boom generation are going to be forming households at a constant and solid clip for the next seven to ten years. Re-positioning now puts you in the right place to take advantage of these future gains, high prices or not.
- Moving Equity
When moving equity from one property to another, it is done in the same market. It is not as if one were selling low and buying high, but buying and selling at the same relative terms. I did an analysis of customers who purchased property at the peak in 1990 and held their property through 2000. Their returns were outstanding, at between 15-25%. Anyone would be satisfied with this rate of return on investment.
These are just some of the great reasons to pursue a 1031 Tax Deferred Exchange right now. Please call Rick Thornton at 858-227-7767 and I will put you in touch with a local Apartment 1031 specialist and go over how a property manager helps you make this happen.