Commercial real estate or CRE has historically been rich with benefits, providing many investors with attractive risk-adjusted returns. As an alternative asset class, it also has a track record of delivering robust portfolio diversification.

According to a new analysis from Yardi Matrix, multifamily investors are increasingly willing to pay more than ever before for the asset class.

Investors who are looking for greater diversification and the potential for a steady stream of income may consider adding multifamily real estate to their portfolios. While many different property types are available to investors, multifamily properties have remained a consistently popular asset class for years.

If you’re a real estate investor, you may wonder how this rising price environment will impact your current holdings and whether you should make some adjustments to your portfolio. Here are a few things to consider before you make your next move.

Want to sell your management-intensive multifamily property but do not want to buy another property or pay capital gains tax? Consider a Delaware Statutory Trust (DST), which is becoming increasingly popular among accredited investors selling property using a 1031 exchange. Investors are not required to provide additional capital for repairs and maintenance as allocated within the budget. Perhaps most importantly, investors have NO responsibility for operating the properties.

There is a backup plan that could save your exchange from taxation. If suitable, the Delaware Statutory Trust or DST is a great option.

If you own an investment property and are thinking of selling it, if suitable, engaging in a 1031 “like-kind” exchange may be a smart move. When done correctly, a 1031 exchange will allow you to defer all or part of the capital gains and depreciation recapture tax you would otherwise need to pay upon completion of your property sale.

When engaging in a traditional 1031 exchange, you must sell your original property before you can purchase a replacement property. The major drawback here is that if the original property takes a long time to sell, you could miss out on your opportunity to buy the perfect replacement property. This is where a reverse 1031 exchange comes in.

The possible tax benefits that the 1031 exchange may offer, in combination with the option to divide assets appropriately to benefit heirs down the line, make 1031 exchanges an estate planning strategy worth considering.

Are you thinking of selling your multifamily property and do not want to pay capital gains tax? DSTs are passive real estate investments run by professionals who manage property acquisitions and day-to-day operations. They often contain relatively low minimums, making them accessible to many real estate investors.  

Thinking of selling your multifamily property, but unsure of your tax exposure? The more you understand the ins and outs of capital gains and ordinary income, the better prepared you are to lessen your potential tax hit.

If you’ve been thinking about engaging in a 1031 exchange, a Delaware Statutory Trust (DST) can be an excellent option. However, before getting involved, it’s important to understand the ins and outs of how they work. In particular, “7 Deadly Sins” must be avoided. Otherwise, the DST will fail to meet the “like-kind” requirements established by the IRS.

Attending ICSC? Close out the conference with eXp Commercial! Join us for a free networking event with eXp Commercial President James Huang, Director of Growth Stephanie Gilezan, plus other top agents, brokers, and CRE influencers LIVE in Las Vegas on May 24!

Even before Covid-19-related hurdles, normal tenant troubles, property maintenance, leasing agents, and property managers make for a headache and a hassle. Direct real estate ownership is not a passive endeavor, and it is not for everyone.