In the good old days, some of us can remember that real estate was considered a very good and safe investment. It generally held its value well and some people felt like you really could not lose money on real estate. In those times, there was a tax incentive known as a 1031 Exchange that was designed as to encourage people to reinvest their profits on real estate into new ventures. In doing so, the property owners could defer their taxation while the economy would retain these profits as new investments.
Enter the sub prime mortgage crisis which culminated in 2007 and 2008 ultimately contributing to a world wide recession. Suddenly real estate prices were declining rapidly erasing years of wealth accumulation. With many investors seeing prices less than what they paid for the assets, 1031 exchanges have declined tremendously.
Looking into my crystal ball, I would say that it would be premature to write off the 1031 exchange. If real estate prices stablize as expected in the next year or so and price begin to rise again, those people smart enough and with enough resources to invest in the down period will be able to use it again.
Have a great day, all.
David
David W. McCoy
Associate Broker
Commonwealth Commercial Real Estate
10444 Bluegrass Parkway
Louisville, KY 40299
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