For the past years, investors of real estate have been very profitable. However, the market is changing and it may be time for a lot of investors to be on the lookout for 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 net rent income, demanding tenants, and a large amount of equity at risk have caused almost all real estate owners 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. A lot of people are hesitant to reinvest in a new 1031 exchange property due to the fact that its low rental rates, but are unwilling to cash out on the property out of fear of paying considerable capital gains taxes. The excellent news is that for most investors and owners, it is very important to know and understand that a Private Annuity Trust presents a way to defer the paying capital gains taxes, thus creating a lifetime income and protect your assets also.
With the Private Annuity Trust, real estate investors have a safe and legal way to exit from the labor of property management, the aggravation of dealing with tenants, and the anxiety of wondering how property values will fare in the current real estate market.Instead investors can avoid making hasty decisions, feel out the market, and decide whether or not they even want to stay in real estate.
Prior to the sale of the property is final, the property is transferred into the Private Annuity Trust. The Trust assets are protected from lawsuits, and creditors, and the assets in the Trust can eventually pass to the seller’s beneficiaries without worry about the present prevailing 46% estate tax 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. If you began investing in real estate because of the freedom to earn on your own terms, you may be wondering why you now feel stymied by tax codes, volatile markets, and aggravating property management responsibilities.