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Building a Portfolio
Most likely when you acquire a property, you’ll have a plan in place which will dictate the long-term objectives. You and your partner may want to hold the property or move on in a few years. If others take their return and shift funds elsewhere, you’ll have to decide whether you can maintain the place on your own and still get the return you want.
Refinancing could be brought into the discussion, although in today’s market, this step may not enable investors to get the same return on equity that they could take out in the past. Refinancing in the past could have resulted in a lower rate of interest and allowed investors to withdraw cash from their equity. As debt service coverage ratios and proceeds have become more conservative in recent years, refinancing to withdraw cash from equity may not be feasible. You might want to consider selling your property to make a profit. You’ll need to find a seasoned investment sales agent if you decide to sell. You should look for someone who has a well-defined marketing strategy and will promote your opportunity to a wide audience. Check that the broker has a strong track record and a reasonable timeline in place based on the market conditions.
As you think about selling, you’ll want to talk to your accountant about the tax implications. You can get a better idea of your possible capital gains by talking to an accountant. The tax implications will be considered at both the federal and local levels. Knowing what your after-tax scenario will be may make it easier to determine what you want to do with the asset.
Section 1031 of the IRS tax code allows you to exchange one property for another of like-kind without having to pay capital gains tax. This process is often called a “1031 exchange” and involves acquiring an additional property or properties as an investment. You’ll also need to use a qualified intermediary who will hold your funds for you in escrow. Spread the Word
As soon as you purchase real estate assets, it’s important to inform others about your activities. Several real estate professionals that have appeared on my podcast, “The Insider’s Edge to Real Estate Investing,” do a great job of promoting their properties. These include Steve Kachanian from Klosed, and Jeffrey Znaty and George Giannopoulos from Kings Capital.
Spreading the word about your track record brings several benefits. This strategy will help you to stay in the minds of investment sales agents. These professionals can be very busy trying to sell listings. Brokers will pay more attention to your interests if you show that you are active. The adage that “deals lead to more deals” is certainly true.
Certainly, acquiring an initial property takes time and effort. Once you’ve overcome this hurdle, it is time to start building your portfolio. You’ll need to create a plan for cultivating your brand, and reaching out to your target audience. You’ll find more opportunities to invest if you let others know what your interests are and what you do.