Real estate investors is very profitable for the past several years. 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 are not as many solid investment properties accessible in the real estate market today. The sharp increase in real estate prices hasn’t remained in balance with 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 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, the investors of real estate have a legal and safe way to exit from the labor of property management, the aggravations of dealing with the tenants, and the anxiety of thinking how the property values will have a fare in the existing real estate market.With the Trust, there is no pressure to just reinvest immediately to avoid paying capital gains.
Prior to the sale of the property is final, the property is transferred into the Private Annuity Trust. The Trust assets are protected from creditors and lawsuits, and the assets in the Trust can eventually pass to the seller’s beneficiaries without worry about the current 46% estate tax rate. Many investors are concerned that due to significant property appreciation over the last several years, they are now too heavily invested in real estate.
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.