If You Read One Article About Property, Read This One
The past several years have been very profitable for many real estate investors. But the market is changing and it may be time for many investors to be on the lookout for a new strategy. For those who own rentals, the trend was to buy a rental property, see it appreciate, and buy another rental property using a 1031 tax-deferred exchange to eliminate current capital gains taxes on the profits. However there are not as many solid investment properties accessible in the real estate market. The increase in the prices are real estate has not remained in balance together with the rental income. If you’re thinking about selling your investment properties now, you probably are concerned about the large tax bill you’ll face.
Low net rent income, demanding tenants, and a large amount of equity at risk have caused almost all real estate owners to consider selling their real estate. But there are countless investors who feel they are “stuck” with property right now that they’d rather sell. Many are hesitant to reinvest in a new 1031 exchange property because of low rental rates, but are unwilling to cash out on the property out of fear of paying substantial capital gains taxes. The excellent news is that for most investors and owners, it is very important to know and understand that a Private Annuity Trust presents a way to defer the paying capital gains taxes, thus creating a lifetime income and protect your assets also.
With the Private Annuity Trust, real estate investors have a safe and legal way to exit from the labor of property management, the aggravation of dealing with tenants, and the anxiety of wondering how property values will fare in the current real estate market.With the Trust, there’s no pressure to reinvest right away to avoid paying capital gains.
Prior to the sale of the property is final, the property is transferred into the Private Annuity Trust. The Trust assets are protected from creditors and lawsuits, and the assets in the Trust can at the end of the day pass to the seller’s beneficiaries without worrying about the 46% estate tax rate which is the prevailing rate. They just want to sell some of their assets and place their money into a more diversified, completely protected, lower maintenance investment vehicle with predictable cash flow.
If no money is paid from the trust, taxes are further deferred until the payments actually are received and the money can sit and accumulate interest until the seller needs the income. If you began investing in real estate because of the freedom to earn on your own terms, you may be wondering why you now feel stymied by tax codes, volatile markets, and aggravating property management responsibilities.
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