I have a client who bought a couple of industrial warehouse properties in Rochester, MN twenty years ago. Over the two decades that he’s owned these properties, they’ve been relatively management and stress free. He’s gotten to the point where he’s taken a lot of depreciation and the property values are so high that he wants to sell at the top of the market. Unfortunately, he’s having a lot of trouble finding appropriate replacement property.
This is just one example of a situation we’re seeing a lot of right now in the 1031 exchange industry. Many taxpayers are selling investment property, taking their tax-deferred profits and rolling them into other projects.
Build-to-Suit Exchanges
One problem we’re seeing is that many people don’t want to overpay for real estate built in the 1960s or earlier when they can do a build-to-suit 1031 exchange and construct a new property with brand new fixtures and improvements. Even with current costs of labor and materials, the price for new construction property is still roughly the same as for older properties that you have to compete with other buyers for. So we’re seeing a lot of taxpayers buying a new plot of land and constructing improvements on the land through their intermediary as part of their 1031 exchange.
Owner Occupied Businesses
In particular, we’re seeing this with small business owners who have owner occupied properties. For example, consider a taxpayer who is inside the city limits who is subject to more regulatory hassles and higher taxes who wants to move their business location outside of the higher tax and regulatory zones. With the current state of the real estate market, there’s more opportunity to buy raw land outside of the city limits, than there is to purchase existing property.
CPEC1031, LLC in Minneapolis, MN
CPEC1031, LLC has been providing 1031 exchange services to clients throughout the United States for the past two decades. We have the in-depth knowledge and breadth of experience necessary to ensure your like-kind exchange of real estate is a success. Let us help you with your next 1031 exchange! You can find us at our primary offices located in the heart of downtown Minneapolis.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
Defer the tax. Maximize your gain.
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