3 Things To Consider In 2018 Real Estate Investments

Wednesday, January 31, 2018

The 2018 Tax Reforms have made real estate investing even more attractive with the opportunity take a deduction from pass-through income.  

Check out your estimated savings by using our 2018 Tax Reform Calculator.

Looking forward, should you stay with your current real estate investment, or is now the time to use a 1031 Exchange to change up your real estate portfolio?

 

1.  Demographics

If your portfolio includes single family homes, you should consider the demographic shift with a significant "dip" in birth rate moving from Baby Boomers to Gen X.  This combined with substantial college debt delays home buying cycles.  While this might create a case for more rental activity, as baby boomers retire, many speculate that the resulting 'oversupply' may cause a real depression in real estate prices.  Since all real estate is local, it is best to evaluate these demographic trends with respect to your area.

2.  Collapsing Commercial Space

While "retail is dead" may be an overstatement, a drive through most major cities will reveal many recently shuttered retail locations.  Office space, too, is undergoing a footprint consolidation with such trends as the WeWork coworking model.  There is no argument that traditional retail and commercial spaces are changing dramatically.  Again, it is critical to access your local economy as you consider commercial property investment.  Take a drive through your city and really look.  Make an appointment for a tour of a coworking space.  Commercial property will not disappear, but you will want to consider the costs / benefits of meeting these needs.

3.  Blockchain (Yes, I said it!)

While the most well-known application of blockchain, BitCoin, may crash and burn any day, the underlying Blockchain architecture is set to rock the world in the next decade.  What does this have to do with real estate?  Simply, it provides an opportunity to create secure transactions without the current overhead we see in the market today.  There are companies who are currently working on systems to allow secure transfer of assets (think a piece of real estate) that are instantly verified eliminating the need for financial / industry facilitators.  Of course, this will be a long time coming, but maybe not as long as we think.  A trend big enough to keep an eye on!

Future-proofing?

No one has a crystal ball, but maybe now is the time to look down the road a bit to imagine how your investment's ROI might look in a few years.  The good news? If you see an opportunity you like better, the 2018 Tax Reform left 1031 exchanges in place to allow real estate investors to change their properties while deferring their capital gains tax.  (See our tax calculator to understand how beneficial a 1031 exchange can be in your situation.)   Please give us a call or email us with your questions!  Our team has been facilitating safe, secure and efficient 1031 exchanges since 1994.  We look forward to working with you.

Send us your field reports!

We work with investors throughout the United States, and love to hear their stories and the wisdom they have about the market.  Do you see these trends in your area?   Let us know what is going on in your area--we'll share it with the community.

Defer your taxes with a 1031 exchange

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