One of the only constant things about commercial real estate is how much it changes. Trends cause shifts in demand, technology brings in new methodology and, as Texas CRE pros know all too well, a new presidential administration can alter how things are done. The Biden administration has already proposed restricting 1031 exchanges to $500,000 of gain, a move against which Asset Preservation, Inc. is pushing hard.
“The whole real estate industry has been working for two years to show Congress how much it would hurt jobs if they cut 1031s down,” says Greg Lehrmann, Attorney and Senior Vice President with Asset Preservation. “It would freeze capital.”
Asset Preservation, owned by Stewart Title, is one of the largest 1031 qualified intermediaries in the nation and a popular resource for would-be investors interested in a 1031 exchange. So named because it was created in IRC Section 1031, a 1031 exchange allows investors to swap one property for another, deferring capital gains taxes. In doing so, Lehrmann argues it keeps the commercial real estate market buzzing.
“When investors know they won’t have to pay capital gains, they’re more likely to make more transactions,” he says. “That means the title company employees make more. The real estate agents make more. The landscaper makes more. Home Depot makes more. Everybody makes more when people can trade up in real estate without paying taxes and the government actually receives higher ordinary income-tax rates on the additional income earned by all those people and companies.” That’s exactly what he says is happening right now as investors sell off high-maintenance real estate and exchange it for what he calls “mailbox money,” more passive real estate.
“They have three choices: buying into a triple-net property, investing in a Delaware Statutory Trust (DST) or banking on income-producing minerals,” says Lehrmann. Click to read more at www.rednews.com.