Real Estate Investing 101
Updated: Mar 29
Land will always remain a limited resource. That’s one reason the value of real estate typically appreciates over time, making it a favorite among many investors. Not all property investment opportunities are created equal, however. Consider just three of the many factors that can greatly affect the return on a real estate investment:
Location. The difference between investing in property in a booming region and investing in a stagnant area can be colossal. (Be cautious if prices have already soared, however. You don’t want to buy in if the market has peaked.)
Type of property. As baby boomers age, senior housing investment opportunities have become quite attractive. Student housing growth has been robust for about a decade. Oil and natural gas properties and mall development opportunities once ruled the roost. The point is, many real estate opportunities are cyclical. It’s critically important to know what’s in demand.
Tax benefits. Despite the many income tax law changes, real estate investment swaps can still qualify as 1031 exchanges. Properly executing a 1031 real estate exchange allows you to defer the payment of capital gains taxes on an investment property sale under certain circumstances. The IRS rules are complex, but the key takeaway is that subsequent investments are maximized — and thus so are future returns — when the immediate tax bite is eliminated.
1031 Flexibility: Sell One Property Type, Invest in Something Completely Different
The flexibility of being able to invest in different types of properties extends to 1031 exchanges, which is one of the factors that makes these opportunities so exciting. An IRS requirement that the relinquished and new investment properties be “like-kind” can be confusing. Some might think it means that if you sell your interest in, say, a movie theater complex, that you must invest in another movie theater complex to meet the “like-kind” requirement. That’s not the case. Most investment properties are “like-kind” to others. Here are a few examples out of the virtually limitless possibilities for a commercial real estate exchange:
Undeveloped land can be exchanged for a warehouse.
An investment in a manufacturing facility can be exchanged for a housing development.
A peanut farm can be exchanged for a grocery store.A medical office can be exchanged for a retail development.
What is NOT “like-kind”? Assets that belong to different classes. For instance, cashing in real estate profits to invest in artwork or a coin collection would not qualify as a 1031 exchange. Also, properties that are not within the U.S. do not qualify — nor do properties that are for purely personal use, such as your home.
Explore 1031 Opportunities With Precision Global Corporation
At Precision Global Corporation, we are partners with investors — our investment is on the line with yours, so we are motivated to succeed.
Our current projects reflect our preference for assisted living communities, an area in which we believe demand is presenting fantastic opportunities.
Whether you are an individual investor, a corporation, a partnership or any other taxpaying entity, you can take advantage of these intriguing 1031 real estate exchange opportunities. Contact us today to learn more.