Without a proper investment strategy, the real estate sector can prove to be quicksand. It might turn out that you sank your money into a commercial property that is on the decline. Such a misstep could leave facing steep losses or possible bankruptcy.
If you find that the rental income in such a property is just enough to meet your financial needs, then it is time to rethink your strategy. The sooner you take corrective measures, the better. It might be time to get into the more lucrative tic properties.
1. Defer the capital gains
Depending on your tax bracket, selling a property you’ve owned for less than a year could pay up to 39 percent in capital gains tax. Losing that much money considerably lowers your purchasing power and options.
However, financial experts from 1031 Exchange Place note that opting for tenants-in-common (TIC) properties offers you opportunities to defer these gains. Better yet, a TIC property exchange offers you a wide range of options.
You could choose to buy up to three other commercial properties or go the TIC route. The latter lets you buy a fraction of a much larger property, usually, one that is beyond your affordability.
2. Diversify your holding
Chances are that after such a scare, you would want to minimize your investment risks. TIC property exchanges offer a way to grow your holdings while minimizing risk. Instead of putting all your money into one commercial property, you could spread it into three different ones.
For instance, you could buy part of a luxury hotel, a learning institution, and an elderly care facility. That way, you get to diversify your portfolio and spread your risks over different sectors. Best of all, you get to turn your investment into a passive income as you will not have any property management role.
Missteps while investing in the real estate sector can leave you nursing hefty losses or staring at bankruptcy. Luckily, taking part in a TIC exchange could help you correct such mistakes quickly and save your investments.