Mac McCall

MIAMI—You may be tempted to sell now, but is it the right time? What factors, besides taxes, should you base your selling decisions on? Where to 1031 exchanges come into the mix? caught up with Mac McCall, regional managing director of Franklin Street, to get his take on these issues. Be sure to check out part one of this interview if you missed it. Should you keep your asset for a longer period of time?  

McCall: It all depends on your investment objectives. If long-term cash flow is your objective then good real estate is the place to be. If you want to cash out and take advantage of record pricing then now is a great time to do so as so much capital is flowing into investment properties. On what other factors, besides taxes, should investors base selling decisions? 

McCall: Taxes should never be the driving force in your investments. You invest in real estate for wealth preservation and appreciation just like any other investment. If there are alternatives investments that offer owners a better yield then they will sell their real estate and invest in these alternatives. If your outlook is higher inflation, real estate and other real assets provide protection. What is your outlook for 1031 exchange deals in 2013? Do you expect an uptick?

McCall: The amount of 1031 exchanges will depend on how many properties are selling in the market. I expect the market to continue to be very active in 2013 as pricing will continue to increase as more investors flock to real estate due to the lack of alternative higher yielding investments. A higher percentage of sellers will be inclined to complete 1031 exchange if they can find a suitable exchange property due to the higher capital gains tax rate.

Most owners may consider a refinance if the leverage amount is beneficial to them. Even though it is a seller’s market, many don’t want to sell because they aren’t seeing anywhere to reinvest their capital that can provide adequate yield to their current situation. Due to the lack of new construction many retail properties owners aren’t opposed to taking refinancing proceeds and renovating their properties to push rents higher as tenants clamor for more space.   

Did you miss part one of this article? Click here to read it.