For years, real estate has been in the doldrums following The Great Recession, but this is beginning to change. McManus & Associates Founding Principal John O. McManus today discussed considerations for real estate investors, from basic to sophisticated, during a conference call with clients. Below, press play to listen to the call recording and read about the 10 issues covered during the discussion:
- How can landlords solve for concerns regarding liability and mitigate risk pertaining to investment properties? All real estate investors must consider a Limited Liability Company and Umbrella Insurance, which are cost-effective solutions to provide peace of mind and protect personal wealth in the event of litigation in connection with a property.
- What is cost segregation and how can it aid in minimizing income taxes? Owners and developers of real estate acquisitions made within the past decade may consider an analysis to understand the benefits of accelerated depreciation and greater tax deductions.
- What are the advantages of being characterized as a real estate professional? Investing sufficient time in the management of your properties allows property owners to offset income with rental losses and to avoid net investment income tax of 3.8% on rental income.
- What are the benefits of a 1031 exchange and what steps must be followed to implement? This common strategy for the deferral of capital gains requires a particular procedure to be followed in order to have the desired tax result.
- What is a monetized installment sale and why might it be preferable to a 1031 exchange? The participation of a third party intermediary can both defer capital gains to be paid in increments over a 30-year period and allow for a step-up in basis when the sale proceeds are deployed into the next real estate acquisition.
- What do we know about Opportunity Zone Funds? Uncertainty still surrounds the implementation of the recent Tax Code changes, but sophisticated real estate investors may find these partnerships to be appropriate vehicles for deferring and writing off capital gains.
- What are the advantages of using a Family Limited Partnership as a real estate holding company? Family Limited Partnerships are multi-purpose entities which can consolidate management of real estate investments, enhance liability protections, and facilitate wealth transfers to the next generation.
- What is a step up in basis and how does it impact the decision to gift real estate? Resetting the basis of a property based on a date of death value provides valuable advantages for loved ones who may continue to hold the investment or who decide to sell; however, gifting a depreciated property during lifetime can sacrifice this benefit.
- What is the alternative to gifting a low basis property? Use a depreciated property as leverage to secure financing which can provide liquidity to fund a transfer of wealth, while also allowing an investor to preserve the step-up in basis by holding the property until death.
- Why is life insurance an essential planning consideration for real estate investors? Life insurance can be a tax-free tool to provide readily available cash to pay for estate taxes, fund a cross-purchase agreement, or facilitate property acquisitions between family members.
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