Investors often ask, “How can I maximize the value of my real estate and minimize the potential tax implications of an exit?” It’s best to start thinking about these questions well in advance of the intended sale or exit.
Aside from maintaining the physical property in a manner that will bring about maximum value, the structure of the underlying lease agreement/s can have a significant effect on value. Remaining lease terms, escalation clauses, and renewal options are all key elements in determining future cash flows and how they will be analyzed and viewed by prospective buyers. It may be possible to restructure terms and options of the lease to provide maximum future value.
When handling property ownership and commercial real estate portfolios, strategies exist for minimizing the impact of capital gains taxes. Whether a 1031 Exchange or some other form of tax incentive is most advantageous, your commercial real estate broker should work in conjunction with your accountant(s) and attorney(s) to structure approaches for estate planning and an effective exit strategy. Long term monitoring of your assets will give you the perspective and opportunity to make the best financial decisions in a timely manner.
It is never too early to start thinking about an exit strategy. Your commercial real estate broker can work with you as a trusted advisor to achieve goals and implement a successful plan.