Mid-Atlantic Real Estate Investment Market Report: Dec. 2019
Three words that can make or break an investor – capital gains taxes. The taxes from selling your investment property range from 15 to 30 percent, when state and federal taxes are combined. Ouch, there goes your profit margins or money for future investments. So how can you, as an investor, avoid them? The 1031 Exchange.
The 1031 Exchange is a powerful tool, making it a favorite among savvy and successful investment professionals. Let’s dive into the basics of the 1031 Exchange.
What is a 1031 Exchange?
A 1031 exchange gets its name from the Internal Revenue Code, Section 1031, which allows you to avoid paying capital gains taxes on an investment property upon its sale – as long as the profits are reinvested in like-kind properties. Like-kind refers to the nature or character of the investment rather than the form; therefore, any investment property can be exchanged for another type of investment property. In theory, an investor could defer capital gains on investment properties until death, potentially avoiding them altogether.
read more about using 1031 exchangesMarket Activity
Colliers International reported that CoStar recognized Richmond as having the fifth-lowest vacancy in the nation, tied with Seattle, when accounting for all single/owner occupancy. In regards to office space, the region continues to see tight occupancy especially in large quantity of space. The average asking rate for the market has held steady at a record $20.40 per square foot.
Market Activity
According to Institutional Property Advisors, steady job growth will contribute to more than 22,000 households this year, raising the demand for additional homes and rentals. The highest leasing activity was seen over the summer and autumn seasons, there were more apartments absorbed during this period than in all of 2018. Due to the a growing market of skilled labor, Class A rents are increasing at an above-market rate.
Market Activity
Young professionals continue to move to this region due to the numerous public and private sector job opportunities. This increase in demand created a strong summer and autumn leasing season, as stated in a market report by Institutional Property Advisors. Vacancy decreased to 3.4 percent, a 14-year low, due to the increase in leasing over summer and autumn. Availability is expected to stay below 4 percent for 2019.
