bigger pockets rental property evaluator

Also, it is not uncommon to find properties within a DST investment that include institutional-quality assets like those owned by large investment firms, such as a 450-unit Class A multifamily apartment community or a 100,000-square-foot industrial distribution facility leased to a Fortune 500 logistics and shipping company. Also, because DSTs are eligible for 1031 exchanges, investors can sell their investment property and reinvest the proceeds into one or more DST investments while deferring capital gains and other taxes.Īnother reason DST investments are popular among real estate investors is because many types of diverse real estate assets can be owned in a DST, including industrial, multifamily, self-storage, medical and retail properties.

Delaware Statutory Trusts are a form of fractional ownership that can be used to make passive investments in real estate and achieve monthly income potential via ACH direct deposit and diversification across multiple assets. That’s why many landlords are utilizing Delaware Statutory Trust (DST) 1031 exchanges to exit the active management role of owning rental real estate. These associated taxes could potentially take up to 40% of the asset’s sale price out of the seller’s proceeds. So why don’t rental owners simply take their equity positions and cash out? The simple answer because of the tax liabilities - including federal capital gains (15%-20%), state capital gains (0%-13.3% depending on the state), depreciation recapture tax (25%) and possibly the Medicare surtax (3.8%) - will now be due upon sale. Enter the Delaware Statutory Trust and Passive Real Estate Investing Add to this the uncertain factors, like inflation and unemployment, higher taxes, and a softening rental market, combined with city- and government-imposed rent-control and eviction moratoriums, and more landlords are coming to the conclusion that now might be potentially a good time to sell their investment real estate. In some cases, this cash-on-cash return can be squeezed from a double-digit return to a low single-digit return. The result is that the cash-on-cash return, or “equity yield,” gets compressed the higher property values rise. Why? Well, for several years now, property values in certain situations have risen faster than an owner’s ability to raise rents. Limiting security deposits to 1.5 x month's rent.Īdding to these growing restrictive rental laws, landlords today must also face the reality of complicated and costly eviction laws and the soaring costs associated with repairs and maintenance.įinally, many owners are recognizing that perhaps their rental property may not make as much financial sense as it once did.Requiring landlords to accept previously evicted tenants.Limiting the use of financial background checks.Prohibiting the use of criminal background checks.For example, a recent Wall Street Journal article cites that apartment owners and investors are leaving California and the Northeast for places like Florida, Texas and the other Southern states where warm weather, business-friendly governments and laws, lower taxes and fewer regulations seem like a breath of fresh air.Įven more worrisome for landlords, cities like Portland and Oakland have recently created new restrictions limiting the ability of landlords to screen potential tenants, including: Even national media are picking up on this trend. While this may sound like hyperbole to some, our firm is actively working with numerous apartment owners across the country, and we hear firsthand some of the challenges and pressures property owners are facing. The Growing Impact of Rent Control Before and After COVID-19

However, the steady march of new government regulations, the impact of COVID-19, and some basic real estate economics have helped some real estate investors recognize that the real estate investments they own have become less profitable and could even worsen to the point where investors could actually lose money each year. Are You Being Too Frugal in Retirement?.

Bigger pockets rental property evaluator