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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 heigher value." This turned out to be fairly good advice. Here we are in 2003 and there are still some great reasons to utilize your ability to exercise a 1031 tax deferred exchange. The following are a number or reasons and/or circumstances that make this a good market make a trade up:
High Equity to Income Properties
If you own a house or condominium that is substantially paid off or free and clear this is a great time to transfer that equity into an apartment building. You can maintain or sometimes increase your cash flow, limit your management time by hiring management, triple your rate of return (Call me and I can run through the figures with you), set yourself up for triple the retirement income in ten years, increase your depreciation and do this with downside risk protection. Call for a free appointment to run through the figures and the possibilities.
Interest rates
Interest rates are incredibly favorable with a full range of possibilities including variables that start at 4.5%. Hybrid loans that are fixed for a number of years 3, 5 or 7 and then become variable loans and that start from 4.3 to 5.5 fixed over the intitial term. There are even programs available that are fixed for 15 years and amortized over 30 years, but then contain a baloon payment at that time. Borry money when it is cheap.
Availability of Properties
Many owners are taking advantage of the high prices to sell out making availability of properties very good. Availability is good with the exception of coastal units.
Reposition for the Echo Boom
The Baby Booms children are going to be forming households at a fairly constant and solid clip for the next seven years. Re-positioning now to take advantage of those future gains is a good move 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 you are selling low and buying high. You are buying and selling at the same relative terms. I did an analysis of customers who purchased at the peak in 1990 and held their property through 2000. Their returns were outstanding 15-20%. Anyone would be satisfied with this type of return.
There are many good reasons to pursue a 1031 exchange. Please call Rick Thornton at 858-483-3534 Ext 13 for a free analysis appointment today.
