In April, the Taxpayer Coronavirus Relief Plan extended the 1031-exchange 45-day identification requirement and the 180-day closing deadline to July 15th for those already involved in an exchange that began on or after April 1, 2020. If this is you, are you struggling to meet the deadline and defer capital gains tax? Not sure it’s possible?
As the July 15 extension date approaches, Westwood Net Lease Advisors wants to assure you it is still very possible to meet this deadline and utilize the tax opportunity. Despite the perceived challenges, we have been helping investors successfully close on properties and meet their 1031 timelines throughout the COVID-19 pandemic.
How to Overcome Current 1031-Exchange Obstacles
You may have heard that lenders are being stricter and adding debt reserve requirements, that site visits and inspections are more difficult due to properties being temporarily closed, and that many sellers have decided not to sell, assuming it’s not a good time. Though some of this may be true, we have helped many clients overcome these obstacles, meet their 1031 exchange deadlines, and close on investment-grade NNN properties in the midst of COVID-19. Here’s how …
Lenders: If you are working hard to find a property for your 1031 exchange but assume you can’t get financing, Westwood Net Lease Advisors can help. We have a selection of reputable financial resources that are still lending with favorable interest rates and terms for essential retailers such as Dollar General, CVS, Walgreens, 7-Eleven, or healthcare clinics, such as DaVita or Fresenius.
Site Visits: Most of the time, site visits for absolute NNN investments are not required as they are constructed and built-out to brand specifics and strict codes. They are also usually backed by corporate-guaranteed leases for the entire length of the lease, so the landlord is typically not responsible for anything except enjoying the monthly rental income.
Fewer Listings: As for fewer listed properties, Westwood Advisors have strong industry connections with whom we communicate daily to learn of properties coming up for sale before they hit the open market. In fact, a good portion of our buyers’ investments are sold by the developers or through word-of-mouth, which provides distinct advantages (no buyer competition, easier negotiations) for our buyers.
Our team of experienced NNN lease Buyer Advisors will make sure all the IRS 1031-exchange requirements are satisfied while ensuring your investment needs are met and that you understand any risks involved.
Encouraging Q1-Q2 NNN Investment Trends
Throughout the COVID pandemic, the market has remained steady with stable cap rates, typically between 5.00-7.00%. These tend to lag 6-12 months behind market fluctuations, so they have the potential to stay relatively unchanged. However, depending on how much the retail market deteriorates, we could see an increase in cap rates later this year.
We are also seeing historically low interest rates, which can increase positive leverage, provide a higher cash-on-cash (CoC) return, and a better overall rate of return (IRR).
If you can designate and/or close on your 1031 exchange by July 15, you will have the ability to capitalize on the positive spreads between low interest rates and steady cap rates and receive stable monthly income during this unusual economic time.
To Wrap it Up – Take Advantage of the §1031 Extension
If you still need to preserve capital by deferring the capital gains tax on a recently sold property, take advantage of the 1031 exchange extension right away. We understand the Taxpayer Coronavirus Relief Plan can be confusing, that’s why Westwood Net Lease Advisors are here to help you navigate the entire process from the property search and identification requirement all the way to closing, at no charge to you. Don’t throw money away on the capital gains tax – contact us today for a no-obligation consultation, 314-997-5227.
