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1031 Exchanges, Great time for Investors

By
Mortgage and Lending with Cumulus/Ann Arbor Radio

In our challenged market it is always important to realize that there are opportunities when there are challenges.  I have heard, from various Realtors, that investors are back in Michigan looking to take advantage of Real Estate oppotrunities.  This is a good sign for our market and may indicate reaching the bottom; of course only time will tell.

1031 exchanges for our investment clients are great tools to take advantage of a down market.  Below is a quick summary of how exchanges work.

1031 tax deferred exchanges allow investors to sell an investment property and then re-invest the gains from that sale to invest in another investment property without having to pay capital gains taxes.  This is a simplified explanation but should give you an idea of how they work.  I am not a CPA or attorney, just for the record.

So why does this market lend itself for an opportunity to investors, see example below.

The example is easy.  Let's say you own an investment property that is worth, $200,000.  Let's say the market is off by 10%, so the home is now worth, $180,000.  Now take that same scenario and find a home worth $400,000, down 10% is now worth $360,000.  As you can see the investor can, if the market turns and hopefully it will, sell the $180,000 home for a  $20,000 loss but purchase the $400,000 for a discount of $40,000 (net gain in a better market is $20,000).

As market values slide, cash flow opportunities for investors increase.  We've all thought at one point or another in our careers in Real Estate, if I would have only bought 5 years ago, look at what I would be worth today.

In 5 years, that is what we are going to be saying about our market today.  If only I would have bought up some of these homes at today's prices to sell at a future date.  Hence, investors are best positioned to take advantage of these declining values and turn into positive cash flow and potential large gains for sale at a future date.

Have questions?  Please feel free to contact me, 734-913-4346 x1004 or Jim.Hood@americanhm.com.

Now let's go find some investors and help them make some money!

Jim Hood, American Home Mortgage

Equal Housing Lender

Paul Moye
Benchmark Realty - Franklin, TN
Broker, GRI, SRES

Do you want to know a secret Nashville TN is one of the hottest 1031 Exchange Markets in the Country. Like kind upgrades are what these investors and buyers are enjoying! Our motto...California here they come!!!

Apr 18, 2007 04:17 AM
Todd Waller
Berkshire Hathaway HomeServices Snyder & Company, REALTORS - Ann Arbor, MI
Todd Waller | Real Simple Real Estate

Wow Jim!  Great article on 1031 Exchanges.  Now, for more exposure in Active Rain, join some groups and then post this article in those groups.  For example, new RE investor or new agent groups might benefit from something like this.  Any Michigan realtor groups would also be a great place for this article.

It is great to see you mixing it up on ActiveRain.  Keep posting!  You are off to a great start.

Apr 19, 2007 11:32 PM
Bill Exeter
Exeter 1031 Exchange Services, LLC - San Diego, CA
1031 Tax-Deferred Exchange Expert
So true!  It is even more true today as the market continues to correct.  Those who are in cash and waiting to buy are in the drivers seat now. 
Nov 26, 2007 05:31 PM
Bill Exeter
Exeter 1031 Exchange Services, LLC - San Diego, CA
1031 Tax-Deferred Exchange Expert

Hi Jim,

Have you seen any changes in your residential market prices since you posted this? 

Dec 30, 2007 02:06 PM