New Exit Strategies - Trends in §1031 Exchange Alternatives Another GREEN trend for Building Owners
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oday’s real estate investors thinking of selling a property to lock in gains or to free up time for retirement share a growing list of concerns according to Erikson Nystrom, Managing Partner of Wealth Exchange Solutions. “Most investors are dreading the tax bill on their appreciated assets and many have become tired of day-to-day management. They may also desire to consolidate, diversify, or upgrade holdings and if possible, improve cash flow on their real estate assets.” “With certain markets and property types providing better than expected returns, many investors now face sizable gains without a defined exit strategy,” Nystrom adds. “It used to be that selling real estate
AUTUMN 2005
and buying another investment property in a §1031 tax-deferred exchange was a typical option. But it’s different now,” he comments. Investors are faced with a wide array of financial concerns – from providing for a college education to preparing for retirement, planning an estate, or supporting an aging parent. Nystrom warns, “Under these circumstances, swapping into a replacement property with new headaches or marginal cash flow may not be the best answer.” Fortunately, recent government guidelines have spurred a wider choice of “turn-key” solutions for investors to consider as replacement property in an exchange. Nystrom adds, “These new options include tenant-in-common (“TIC”), Delaware trust, UPREIT, and private royalty interests offered as security investments. These programs take the
stress out of short identification periods, eliminate day-to-day management, increase the grade and quality of real estate investments, and may improve income potential. Many programs provide a “coupon clipper” or “mailbox management” investment that can save investors time and money.” “Because these investments involve varying degrees of risk and are not suitable for everyone, interested investors should seek competent, objective guidance when considering an exchange or any replacement property solution,” says Nystrom. Properly planned and implemented, these innovative strategies can help investors preserve real wealth for the future and better enjoy their life today. ≠
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