IAHIS Suggests Real
Estate Investors Risk Lost Profits In Investing Boom
Given the recent popularity of home makeover programs on TV it is
perhaps not surprising that the National Association of Realtors(R) (NAR)
should have announced that 23% of all home purchases in 2004 were made
as investments and 13% as vacation homes. The study by the NAR also
shows a marked increase in the number of second homes being purchased as
investments. The success of real estate investments has in part been the
ability to defer paying capital gains taxes. However, the complexities
of this process could mean new investors risk losing out when it comes
time to sell.
"While many people seem to have taken to the idea of remodeling
older homes in the hope of making a quick profit, I was surprised by
just how big a slice of the market these statistics show has gone to
investors," says Nigel Fenwick, REALTOR(R) and Founder of The
Association of Home Investor Specialists (IAHIS). "There is
certainly money to be made in real estate but investing it's not without
risks. With so many new people in the market, many investors could risk
profits without realizing it."
"For example, investors who don't know they can defer their
capital gains tax on a home purchased as an investment might compromise
their ability to use their gains for future investments," continues
Fenwick. "By taking advantage of 1031 Tax Exchanges, investors can
buy and sell multiple properties while deferring capital gains taxes
almost indefinitely."
Under complex tax rules for such investments, investors can transfer
their assets from one real estate holding to another while deferring
capital gains taxes owed on the sale, provided they follow the rules and
plan ahead. Restrictions include not using the property for personal use
and specifying a 1031 Exchange at the time of sale. Because of the
complexities of compliance with the rules, many investors use firms that
specialize in these exchanges to facilitate the process.
To help new real estate investors, IAHIS has established a new
"Associate" membership level. Associate members receive twelve
issues of The Home Investor Monthly; an electronic journal providing
tips and advice on creating wealth from real estate.
The Association's website, www.USHomeInvestor.com, provides plenty of help for
new and experienced investors alike, with sections on buying, selling
and renovating homes for profit. The site also includes more information
on how 1031 Exchanges work to defer capital gains taxes on real estate
investments. |
