Real estate values go up, and as you may recall from recent the Great Recession, they also go down. Some commentators are speculating that the current good times will be coming to end, bringing opportunities for investors to buy some bargains.
What is a Downward Market?
A downward market is where real estate values are declining and opportunities are rising - opportunities to buy real estate at a cheap price. Remember, “price” is set by the market which can fluctuate based on emotions, while “value” is established by the cash flow in an economic analysis. So, it is possible to buy a property at a cheap price below its value (based upon the income it produces) and in the marketplace. If you find such an opportunity you want to seize on it immediately.
Well, you say, I can’t buy it now because if I do a 1031 exchange, the typical structure is that I sell and close on my old relinquished property FIRST, and then SECONDLY, I buy my replacement property. If this great opportunity comes up, how can I take advantage of it and still avail myself of a 1031 exchange? Here's an example: a bank takes back a property, but they don’t want to have it on their books. They have to reserve for it, they have to pay for expenses related to the property; they just want to get rid of it. So they’ll sell it at a deep discount - a discount below its actual value just to get it off their books. If you want to acquire that property, you have to move fast before another investor moves in and takes it away from you. A strong cash offer will ensure you are the successful bidder.
CPEC1031, LLC
If you’re looking for help with your next 1031 exchange, contact CPEC1031, LLC today. Our team of qualified intermediaries can help you through all aspects of your 1031 exchange. You can reach us at our primary office located in downtown Minneapolis.
Start Your Exchange: If you have questions about taking advantage of downturns in the Minnesota real estate market, feel free to call me at 612-643-1031.
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