LUBBOCK, Texas, April 4, 2017 /PRNewswire/ -- Donald Trump's Presidency marks the first time that a Billionaire businessman has been elected into office whose political approach is so non-traditional that it has people wondering, 'How should I position my investments?'
The White House website references that Trump's plan is to create 25 million new American jobs in the next decade.
If Trump makes good on his promise, the real estate industry is poised to benefit in a number of ways.
First, the number one factor contributing to the economic health of any local community is the job market. If there are more jobs, the real estate market as a whole will uniquely benefit through rising asset values and occupancy rates.
Second, whether it be conscious or subconscious, Trump is a real estate investor, and will likely implement measures favorable to real estate investment.
Third, tax measures aimed at easing burdens on corporations will allow for selling investments without tax backlash, while the deregulation of lending will allow for a flow of money into purchasing investments, so the fluidity on both the buying and selling side will provide positive momentum within the industry.
This being the case, many people are interested in investing into real estate, but as the name 'alternative' investment implies, an established pathway for getting started practically doesn't exist.
So, here's a simple step-by-step process for how to take advantage of real estate investments:
1. Research Private Real Estate Investment Firms who invest in solid markets and have excellent results to show for their investments.
It may be prudent to begin interviewing locally to become acquainted with the industry. Before investing, confirm that the company is investing in solid markets.
Submarkets are emerging local real estate markets that are poised to withstand a declining national economy, while prospering in a rising national economy. Factors that determine if a market is an emerging market vary, but some of them can include job growth increasing two percent or more consecutively for three to five years and population growth increasing two percent or more consecutively for two to five years. Stronger markets include a broad range of industries represented within the community. Ask for the company's criteria for how they choose their markets.
When the list of potential companies to invest with has been narrowed, ask for historical returns. Results, not rhetoric, is what counts when it comes to realizing real profits.
Before investing, ask for clarity of the structure of the investment and how the profit will be distributed once a property is sold.
2. Convert IRA to Roth-IRA for Tax-Free Earnings in Retirement
One of the benefits of the stock market is the ability to invest money into the market, and compound interest, rather than pull funds out, and get slammed with capital gains taxes.
Investing from a Roth-IRA is one method to defer taxes to continue compounding returns, while providing an instrument for zero capital gains taxes to be paid once the funds are removed in retirement, provided certain stipulations are met.
An IRA is a tax-deferred instrument, while a Roth IRA is a tax-free instrument. With a Roth IRA, the investor pays income taxes the year they convert from an IRA to a Roth IRA, but the account will grow tax-free, and after 59.5 years of age the investor is able to withdraw earnings tax-free, so long as they have been held in the account for five or more years. This is not tax advice and a tax professional should be engaged for details. There are several companies, such as The Entrust Group, that perform these conversions. When investing using a Roth-IRA, the investor can invest into real estate and multiply funds for retirement that will be tax-free!
Don't have enough money set up in an IRA account yet?
3. Set-up 1031 Exchanges to Avoid Capital Gains
Another overlooked gem that works well with real estate is a 1031 exchange.
If an investor does not yet have adequate funds accessible from an IRA account, they can still establish this kind of tax-deferred benefit in real estate through the use of 1031 exchanges. With this kind of arrangement, the investor can move profits realized from the sale of one real estate property into another "like-kind" property, which defers the taxes on it. Typically, any property that is classified real estate in any of the 50 U.S. states will qualify as "like-kind," so if the investment company has routine real estate opportunities available, the investor should not have a problem meeting the requirements for a 1031 exchange, such as identifying a replacement property within 45 days following the sale of the initial property. When investing using 1031 exchanges, it is not only interest that becomes compounded; in addition, the profits of the sale can be compounded. There are many firms that structure 1031 exchanges, and a reputable investment firm should be able to refer investors to a reliable company.
Real Estate is a robust industry and should not be overlooked when it comes to investments. Not only is real estate tangible, it can also provide double-digit returns, and for those who know how to take advantage of beneficial tax strategies such as Roth IRA's and 1031 exchanges, it allows investors to avoid capital gains taxes for the accumulation of exponential wealth.
Blake Templeton is the CEO of Boron Capital, a private real estate investment firm based in Mesquite, NV that analyzes conditions affecting the economy and investments. More information about Boron Capital can be found at www.BoronCap.com.
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