Dear Landlords and Investors,
The principles of leverage, supply, demand, and ROI still push appreciation. San Diego has proven to be a wise location for your investment dollars. But, don’t become complacent. Don’t lose track of why you are investing, regardless of how successful you are. Dealing with unexpected issues can make or break your business. So of course, you’re right to want to understand how the current market affects your property values. You deserve expert guidance. Here are details on what you need to know now:
SPRING MARKET UPDATE
As we enter our prime-time Spring selling season the 2-4 Unit Inventory is picking up. Closed sales on average are within 98% of the list price. And days on the market is just over a month.
Buyers hunting for a “good deal” are struggling. Trying to find units that pencil out well enough for them to feel comfortable. Comfortable enough to take cash out of a high-yield account to make a purchase. They’ve become accustomed to their 5%+ interest with their safe investments. The risk of moving their funds into real estate needs to make dollars and sense. Meanwhile, those who do move forward with purchasing are smiling from ear to ear. For two reasons. Both their property values and rents continue to climb.
Sellers continue to get top dollar for their properties. Due to high demand and low inventory. We recently put out a video on the top 5 things seller can do to get maximum returns when selling their multi-units. We’ve included the link. Selling an investment property needs to be thought out in advance. This video explains how to get top dollar:
How To Sell Your Multi-Unit Properties
For those buyers who keep waiting for the perfect property to come to the market. This may never happen if you’re too picky… Remember, the name of the game in San Diego is appreciation! Lyle coined the phrase years ago, “We live in real estate Disneyland here in San Diego”. And this still rings true. A recent Los Angeles Daily News article touted- “San Diego led the 20 cities tracked with an 11.2% increase in the 12 months ending in January, according to data from S&P CoreLogic Case-Shiller.”
https://www.dailynews.com/2024/03/26/us-home-price-growth-picks-up-with-healthy-gains-across-cities/
The truth is that perfect property may never appear. Instead of focusing on finding the perfect deal, work with current market conditions and what’s currently listed for sale. Hedging on the long-term appreciation. Generating cash flow in the meantime. All the while knowing that your income property is a self-amortizing asset. Paying for itself all along the way through the rental income. Oh, and remember the 27 ½ year depreciation allowance
YOU DON’T HAVE TO SELL YOUR PROPERTY TO DO A 1031 EXCHANGE
In a “Reverse Exchange”, you can remove all the reinvestment risks by purchasing a replacement property before selling your relinquished property. It is a bit more complex than a typical Forward Exchange. Usually, when people think about a 1031 exchange, they think about a forward exchange, which is the more simple one. SELL A PROPERTY. BUY A PROPERTY. However, it’s becoming more and more popular in the market that we’re in today to do a reverse exchange. Where either: A- You’re not comfortable selling the property you have until you find a replacement. Or B- You found a fantastic property that you want to own, but you need to sell what you have so you can free up equity and roll it into your new property.
One of the fundamental rules about 1031 exchanges is YOU can’t be on title on both at the same time. Or you can’t exchange into a property that you already own.
With a reverse exchange, what we do will create a special-purpose, single-purpose entity that the IRS calls an Exchange Accommodation Title Holder or E.A.T
An inside that E.A.T. that’s temporarily going to warehouse title. The IRS calls it parking the title on the property that you’re buying. Once you close on that property, you are functionally the owner, but technically you’re not on title.
Then once you sell the property that you’re looking to relinquish, then you do an exchange into that property that you’ve parked or warehoused that title.
We have some great 1031 Exchange Accommodators who can advise you on traditional or reverse exchanges. Let’s help you do one today and be compliant with the IRS. And let’s not pay taxes where we don’t have to.
RECENT FAQ’s FROM CLIENTS LIKE YOU
- What’s the first thing to do before listing my property on the market?
Know your exit strategy before you list! Very rarely do we have an investment property seller who says. ‘You know I just want to cash out and am totally okay with paying the IRS capital gains taxes my the sale.’
Nope. I’d say 99% of our income property sellers decide to not take that huge hit. Instead, they opt to roll their proceeds into another investment property. Utilizing a 1031 tax deferred exchange. This strategy avoids the capital gains taxes of as much as 33% of their proceeds.
You have choices of how you exit out of any income property. Are you going into another investment property? If so, you’ll want to start searching for your up-leg property before you list your current place. It’s important that you’re familiar with what’s on the market. That way you can do a traditional 1031 exchange. Since you have 45 days after the closing to identify your next property. And 180 days to close on it.
Or maybe you already found and bought your leg-up property and need to do a reverse exchange. Yes, that is a possibility. Especially with the lack of inventory we are experiencing.
Or maybe moving into a Delaware Statutory Trust or DST for short is your thing. That’s where you buy a portion of ownership into an A-class property. It comes with professional management and bookkeeping. Yes, you can get into hands-off management and bookkeeping. Where you sit back and collect your rent each month.
You have a lot of options when it comes to what you can do with your proceeds. So you know, this is one of the first things we talk about before you list your property. In most cases, your exit strategy is more important than the sale. And it absolutely affects how the property is marketed and sold. By no means do we want you scrambling while your property is in escrow trying to figure out what you’re going to do next.
KEEP YOUR QUESTIONS COMING! We love hearing from you. And we plan on answering your questions monthly moving forward. It’s important that you’re informed and educated about what you buy and why you’re buying it.
AND WHEN YOU’RE AT THE END OF THE GAME… READY TO RETIRE FROM LAND LORDING?
Let’s face it. Being a landlord has its ups and downs. If we had to point you in one direction it would be the Delaware Statutory Trust folks. And here’s why. With the DST, you get all the benefits of ownership. Without the hands-on day-to-day dealings of tenants and property management/maintenance. Plus it provides you with cash flow. And in a lot of instances, it’s even more than the relinquished property provided. Second of all, you’ve got professional management and bookkeeping. It’s automatically done for you. We’ve touched on DST options in the past. Don’t be shy, contact us.
Bookmark-Worthy Links
San Diego Real Estate YouTube-Weekly Videos Keep You Connected
Rentometer-House and Apartment Rental Rate Comps
HomeBot-Personalized Home Finance Tool
ALTOS Reports -Powerful Data-Driven Real-Time Zip Code Market Updates
MLS Access for Investment Property -Custom Searches For Investment Property
San Diego Apartment Investors Market Report Archives-Access Past Market Reports
IT’S TIME FOR YOU TO GET THE ROI YOU DESERVE
You’ve worked hard for what you’ve earned, and you’re right to want the best experience. Be confident you have professionals on your side. We use ROI-based marketing. Rest easy knowing we use an organized system to market your property. Employing our highly targeted and proven approach like no one else is what you deserve!
Thinking of selling your property in the next 12 months? Call us today for your strategic marketing consultation at 858-218-4511.
