The past several years have been very profitable for many real estate investors. But the market is changing and it may be the perfect time for investors to be on the lookout for the latest 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 simply aren’t as many solid investment properties available in today’s real estate market. The increase in the prices are real estate has not remained in balance together with the rental income. If you are thinking about selling your investment properties now, you probably are concerned about the massive tax bill you will face.
Low rent income, demanding tenants and a huge amount of equity at risk have caused all real estate owners in order 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 good news is that for many owners and investors, it is important to understand that a Private Annuity Trust offers a way to defer paying capital gains taxes, create a lifetime income and protect your assets as well.
With the Private Annuity Trust, real estate investors have a safe and legal way to exit from the labor of property management, the aggravations in dealing with most of the tenants, and the anxiety of wondering how property values will fare in the present real estate market.With the Trust, there’s no pressure to reinvest right away to avoid paying capital gains.
When the property is ultimately sold, the Trust can begin providing a lifetime stream of income, with taxes deferred over the seller’s lifetime. 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. At the same time, they don’t want to fork over up to 30% of their investment profits in the form of capital gains tax payments if they don’t find a suitable investment in time.
Payments from the trust don’t need to begin right away-not until age seventy. Perhaps its time to take back the control you deserve over your real estate investment career and begin investing on your own terms.