Is Real Estate A Liquid Investment?
As a quick answer, no. Direct real estate is not a liquid investment and is among the least liquid investments you can make due to the amount of time it takes to convert this asset into cash without affecting the price.
Zero Cash-Flow Investments: More Than Nothing
At first glance, a zero cash flow investment might sound like a failure. After all, we invest with the hope of making money, right? Sure, but not every strategy follows the same path, and a zero cash flow investment may offer investors specific opportunities worth pursuing.
What Are The Holding Period Requirements For A 1031 Exchange?
IRS Code Section 1031, which details the exchange of like-kind properties, does not specify a minimum holding period for the deal's properties. The language of Section 1031 does stipulate that the property must be held for productive use in a trade or business or for investment. That applies to both the property sold and the property purchased.
Will the U.S. Face Another Foreclosure Crisis in 2020?
Today, it's not uncommon to find articles about a coming wave of foreclosures in 2020, like what we saw in 2008-2009 (i.e., GFC or Great Financial Crisis). These foreclosures may be attributed to COVID-19 and the economic shutdown. Supporters of these dire forecasts often point to parallels between the high unemployment rate and declining economy from 2008-2009 and current events. While the housing market and economy may look similar to the GFC on the surface, it is too soon to conclude that events will transpire in the same way.
COVID-19 Spikes Create Disruptions In State Economic Recovery Patterns
Employment figures have been volatile since the start of the COVID-19 stay-home orders and business closures began unevenly in various jurisdictions in March. From the beginning of the pandemic to May, approximately 30 million Americans had lost their jobs due to the pandemic. At least a third of those jobs have been recovered, although in some cases the work is part-time rather than full-time. According to the Department of Labor, the good news is that the U.S. economy added 1.4 million jobs, and the overall unemployment rate now stands at 8.4%. This compares to 14.4% in April, and a pre-pandemic rate of 3.8% in February.
Can You Live In A 1031 Exchange Property?
Section 1031 of the Internal Revenue Code allows a taxpayer to defer the recognition of gains (or losses) on an investment property when sold if the relinquished property is exchanged for a like-kind replacement property. While Section 1031 does not specify a holding period for the property, the IRS and courts have generally held that two years is adequate. Separately, IRC Section 121 (a) allows for the exclusion of capital gains from the sale of a primary residence of up to $250,000 for a taxpayer, or up to $500,000 for a married couple filing jointly. The IRS has set eligibility for the Section 121 exclusion at two years (ownership and use as main home) during the last five years, with some exceptions.
Does A Ground Lease Qualify For A 1031 Exchange?
There are ways to structure your ground lease exchange so that it satisfies IRC Section 1031. A ground lease is a type of decades long, long-term commercial lease where the tenant owns the structure but not the land it sits on. The landlord owns a fee simple interest in the ground, not the structure. Tenants have the right to develop and use the property throughout the duration of the lease but pays rent for the land to the landlord.
1031 Exchange Agreement: What You Need to Know
For a transaction to satisfy the requirements of IRC Section 1031, the taxpayer must meet several provisions of the code. While the IRS does not require that the sale and purchase agreements contain language that establishes the owners' intent to complete an exchange, many participants include clarifying verbiage anyway. Often the purpose for the seller to insert this language in the agreement is twofold:
Should I Consider A DST With Or Without Debt?
We’ve published several articles about Delaware Statutory Trusts (DSTs), including the advantages and disadvantages. DSTs let investors enjoy the potential benefits of real estate - rental income, appreciation, tax benefits - without having to have operational control or management of the property. We’re going to take another look at the pros and cons but in relation to debt-free versus leveraged DSTs.
How Do You Calculate The Rate Of Return On Your Real Estate Investment Before It's Sold?
There are many ways to calculate the return on a real estate investment. Two main categories make up the calculations: holding period return (i.e., buy to sell) and performance metrics (i.e., ongoing basis - property not yet sold). For this article, we’ll go over how to calculate the holding period return using an all-cash transaction and then another with debt financing.
