Some investors and speculators in the Las Vegas real estate market are finding themselves currently holding under-performing or non-performing investment properties. Buying low and selling high was the intention, and carrying the property as a rental property became the default plan after the property failed to meet the minimum profit returns for a short term “flip.” The riptide result that these investors counted on did not happen.
Studying the market cycles of a target city is now a requirement for savvy investors who want a performing property. That means looking at the present and the future, not just the past: anticipated population increase or decrease, major employment base, job stability for the average worker, how these workers are paid and how they report their wages to that they can qualify for a mortgage (for example, reported versus non-reported tip income), how many months of inventory are projected broken down by target price range, and also looking at how these factors will impact the rental market.
If you find yourself in an under-performing or non-performing investment property in Las Vegas, you might want to consider a 1031 tax deferred exchange. Lack of performance can typically generate from an initial overestimate of expected monthly rental income, an underestimate of tenancy vacancy rate in that specific neighborhood, and an underestimate of carrying and maintenance expenses, all causing the rate of return on your initial cash investment to look more dismal that what you originally anticipated when you acquired the property.
A 1031 tax deferred exchange is a method available to sell the under or non-performer, and replace it with a better performing investment property or properties in another city or state, and deferring the capital gains tax. Your qualified C.P.A. or financial planner will become one of your key advisors in giving you your estimated capital gains amount, based on projected selling price minus your tax basis. It is not figured on your equity position (sales price minus any mortgage balance). If you are a smaller investor doing your own taxes and financial planning, this is a good time for you to engage a qualified financial advisor to review your real estate portfolio and advise you before you acquire or liquidate property now and in the future, and in what tax year this would be beneficial to you.
You can visit my website at MyWorldLasVegas.com and click on the link for more information about the 1031 tax deferred exchange process, and can also call me direct at 702-596-2497. As a real estate Broker-Salesman in Nevada, I have worked with numerous investors of the past 25 years who completed either side of their 1031 tax deferred exchange, liquidation or acquisition in Las Vegas. Our market has cycled to a point where it might be prudent to liquidate an under-performer or non-performer and replace it with one or more properties in a better performing type of investment property, or liquidate and replace it in another market place location.
Nancy Cokinda, CDPE, SFR, M.S. & B. A. Degrees, Broker-Salesman, Elite Realty, Las Vegas, NV.
www.irs.gov ---IRS homepage
- tax forms and publications
- Publication 544 – Sales and Other Dispositions of Assets
www.ipx1031.com Investment Property Exchange Services (IPX1031)
- Bookmark and label “1031 Information”
- “Exchange Topics” (under “Reference Materials” Tab)
- - Includes a link to the IRS disaster relief notices
- Monthly webinars – Basic and Advanced
- Time and Capital Gain Calculators