Extracting Liquidity While Deferring Taxes

By R.W. Bowlin

Often owners of investment real estate find themselves in situations in which they are “property rich and cash poor.” Thus, when contemplating a tax-deferred 1031 exchange owners often ask about ways to “unlock” equity in their property and receive a cash distribution from the exchange proceeds while still deferring tax.

Property Co-Ownership and 1031 Exchanges

By R.W. Bowlin

Co-ownership structure issues are one of the most common stumbling points for 1031 exchanges, however this need not be the case. With proper understanding and planning, most co-ownership structures can be worked through to satisfy the co-owner’s respective investment objectives. 

What Constitutes a Like-Kind Exchange?

By R.W. Bowlin

1031 exchanges are a popular tool among real estate investors since they can be utilized in a variety of situations – all of which allow for tax deferral. Internal Revenue Code § 1031 states: “No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment.”

Why Use The IRC 1031 Exchange?

By R.W. Bowlin

As real estate investors, we are continually looking for ways to maximize a property’s cash flow and return on equity. One way to do this is to increase the leverage on a property as long as the cost of capital (interest rate) is sufficiently below the property’s Cap Rate. Another method is to “buy up” to a larger property. The key to this strategy is to employ a tax-deferred exchange (1031) when repositioning your investment portfolio.

Know Your Real Estate Objectives for 2019

With the new year comes both new challenges and new opportunities for your investment properties. The one thing we know for sure is that nothing ever stays the same. While we never know what the new year will bring, we do know it will be different from the last. Whatever chapter you find yourself in, we encourage you to consider what your real estate investment objectives are for 2019.

Opportunity Zone Investments vs. 1031 Exchanges.

By Austin Bowlin, CPA

In last month’s article, we presented an overview of a newly established designation created through the Tax Cuts and Jobs Act of 2017 called Economic Opportunity Zones (EOZs) and discussed the preferential tax treatment for investment in the zones. This month, we will discuss whether Opportunity Zone investments present a better tax mitigation and reduction strategy than 1031 Exchanges.

What Are Economic Opportunity Zones?

By Austin Bowlin, CPA

Economic Opportunity Zone Funds (EOZs) have received a significant amount of attention since their creation through the Tax Cut and Jobs Act of 2017. Owners of highly appreciated investment real estate have asked if these funds present a better tax strategy than 1031 exchanges. Like many good questions, the answer is “it depends.” This month we will provide an overview of EOZs, followed next month by an analysis of whether they are more, or less, advantageous than 1031 exchanges.

Sell or Hold? Reasons Why You Should Consider Holding Your Property Today

By R.W. Bowlin

With any investment the long-term question is not whether to sell or to hold, but when to sell. In order to make the best sell or hold decision, there are many factors investment property owners must consider from both a market and personal perspective. In last month’s “Owner’s Advocate” article, we presented conditions that support a decision to sell properties in today’s market. This month, we will present the other side of the coin -  providing reasons why an owner might opt to hold on to their properties.

Sell or Hold? Reasons Why You Should Consider Selling Your Property Today

By R.W. Bowlin

A common adage in real estate is that “money is made on the buy.” How can we refute this truth? A poor acquisition makes generating positive returns very difficult.  However, knowing when to sell is just as crucial and arguably tougher to determine. Throughout the next two articles we will first make the case for selling your property in today’s market, followed by making the case to hold it.

Property Performance Metrics – Return on Investment vs. Return on Equity

By R.W. Bowlin

Quality data is the cornerstone of effective decision making. While it is rarely possible to have perfect information, especially regarding future projections such as how long our current market cycle will last, owners can and should have a firm grasp of both their properties’ current and historic operating data. 

Updated Tax Treatment of Pass-Through Entities

By Austin Bowlin, CPA

The Trump administration’s largest legislative victory of 2017 came to fruition days before the end of the year. The “Tax Cuts and Jobs Act of 2017” is receiving both applaud and outcry as attorneys, accountants, business owners and individuals digest what the impact will be for both themselves and their clients.

Build Your Best Team - How To Evaluate Qualified Intermediaries

By Austin Bowlin, CPA

Successful real estate investors come from a wide variety of backgrounds and employ an assortment of investment techniques. All have their own unique approach to owning, managing and selling assets. However, successful investors have one common element: a team of trusted advisors to help navigate and execute their investment approach. The world of investment real estate is simply too complex to go alone. 

Tax Basis - What It Is & How To Calculate It

By Austin Bowlin, CPA

Investment real estate is far from static, there are many factors that change during the ownership period. Tenants, lease rates, and property values are a few of the most dynamic elements – all change regularly and are crucial to monitor if the property is going to be effectively managed. As of late, laws and regulations have also changed at a rapid pace... 

Estate Planning Considerations for Real Property Owners - Part 2 - Transition Planning for the Property Rich & Cash Poor

By Kell Rabern - CPA - Hutchinson & Walter

Many real estate investors in the Puget Sound have experienced significant appreciation in their properties. However, rapid appreciation can leave investors property rich and cash poor – creating a dilemma when it comes to estate taxes. With recent increases in real estate values, a plausible hypothetical “Before and After” scenario may look like this:

Estate Planning Considerations for Real Property Owners - Part 1 - Avoiding Family Conflict

By Julie Martiniello - Managing Director - Dimension Law Group

For investment property owners estate planning can be complicated. For many the difficulty comes down to whether you can fairly divide your estate as you wish, if you want to put a succession plan in place to pass down your investment property, or liquidate your estate. For others with more complicated family dynamics, other considerations come into play. Below are some common scenarios discussing the emotional and family dynamics of estate planning.

Tax Strategy for Your Highly Appreciated Primary Residence

By R.W. Bowlin

Primary residence home ownership has long been supported by the Federal Government. Homeowners benefit from tax incentives such as the mortgage interest deduction and lending programs like the FHA First Time Homebuyer Program. Additionally, the IRS Section 121 exemption allows homeowners who have experienced appreciation in the value of their home to realize up to $250,000 (if a single taxpayer) or $500,000 (if married-filing-jointly) of appreciation tax-free. What an incentive that is!

Investors Must Monitor Risk

By R.W. Bowlin

Successful real estate investors pay close attention to risk. Risk can be defined as the measure of uncertainty that an investor must take in order to realize a gain from an investment. Without risk, there is no opportunity for gain; however excessive risk, without a greater opportunity for gain, can tip the scales on an investment. Most investors are good at assessing risk when evaluating a transaction. The tricky part about risk is that it is fluid. All real estate ownership presents risk and an existing investment’s risk profile can change quickly. Staying on top of risk assessment is crucial to preserving your appreciation and protecting your returns. The following is a sample of the particularly relevant risks many of our multi-family clients are monitoring in the current market environment:

Are 1031 Exchanges Going To Be Eliminated From The Tax Code?

By R.W. Bowlin

IRC 1031 exchanges have nearly a 100-year history as a part of the Internal Revenue Code. While tax-deferred exchanges have been available since 1921, their longevity does not make them immune from the current tax reform debate. President Trump has identified tax reform as one of the first-year legislative priorities, with a target date of August 2017.

What Is a Tax-Deferred 1031 Exchange?

By R.W. Bowlin  

The 1031 exchange is one of the most effective ways for investors to maximize their investment real estate strategy. 1031 exchanges can be applied in numerous ways to facilitate portfolio growth, cash flow, diversification or many other objectives investors pursue. Unfortunately, 1031 exchanges feel opaque, complex and daunting to many investors, therefore this important planning tool is often overlooked by property owners.