Alabama Real Estate Market is considered one of the hottest housing markets in the U.S. It has an extremely low unemployment rate and a robust cash-flow market. There is a strong need for rental housing as the region has around 8 colleges and universities. The cost of living is 5% lower the U.S. average, and there are also several great paying jobs in the area. Let’s go through the reasons in detail which makes Alabama such a desirable option.
Montgomery in Alabama is a good investment option. Student housing gives a stable income and higher than average returns. The cap rates on student housing properties recently sold were around 6%. Investment opportunities are also available in older student housing that can be restored and rented out as premium.
You’ll also observe a constant turnover as people graduate, followed by incoming freshmen. These tenants will never purchase a home until after graduation, and if they face trouble paying the rent, arranging a roommate is an acceptable solution. Montgomery Alabama, real estate market, is ideal for those who wish to invest in student housing since there are more universities in the area. Therefore, it is an attractive option for a 1031 Exchange.
While the cost of housing and living are comparatively low in Alabama, many residents do not buy a home. This has created a relatively stable market for multi-family housing.
The 2017 Realtors Confidence Index Report called the outlook for single family homes in Alabama as “very strong.” Buyer traffic for Alabama was observed as reliable. For seller traffic, Alabama was stated as having moderate seller conditions.
Prattville located near Montgomery, Alabama, is an exciting option. Capitol Hill Golf Course is located here which is the site of the Nationwide Tour. This town’s population has doubled in the past ten years. This is an excellent place to consider purchasing a rental home whether you’re catering to people or snowbirds relocating to the area before finding a permanent residence.
The median rent priced in Alabama is $1000 a month as per Zillow. If you place $13,000 down on the basic home in the Montgomery real estate market and acquire a $70,000 30-year mortgage at 5%, monthly payments will shape at $429. Add in insurance, property taxes, and occasional repairs for expenses of $700 a month, and you’re still making $300 a month on a rented out single-family home.
Foreclosures are a prime opportunity to obtain affordable homes, though they may need fixing up. The average foreclosure rate in the U.S. is 1.6 homes per 10,000. In Alabama, this rate is 2.3, which means you’ll find significantly more homes possible as foreclosures.
Alabama has astonishingly low taxes. The state and local tax burden rank among the top ten (best) in the U.S. It has a 5% state income tax, which is low, and a 6.5% maximum corporate income tax rate. Alabama is a promising destination if you are looking for a profitable 1031 Exchange replacement property
Let’s also get a better understanding of the 1031 Exchange.
A 1031 tax-deferred exchange allows investors to reinvest the profits from the trade of investment property in one or more replacement properties without inviting immediate federal (and most state) capital gains taxes on the appreciated value. When the sale and purchase fulfill the 1031 exchange standards, taxes are delayed until the newly procured property is sold. This deferral strategy can be duplicated through any number of exchanges until the tax liability crosses into the individual’s estate upon death.
If you opt for a 1031 Exchange in Alabama, you should be aware of the basics. IRC Section 1031 enables an accurately structured exchange allowing any investor to trade property and reinvest the profits in a brand-new property and to put off all capital gain taxes. IRC Section 1031 (a)(1) states:
“No gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment if such real property is exchanged solely for real property of like-kind which is to be held either for productive use in a trade or business or for investment.”
1031 Exchange enables your money to churn the maximum profit for you. However, the process of 1031 exchange in Alabama is extremely complex in nature, and it would be wise to seek guidance from expert professionals. We have extensive experience in handling highly profitable exchanges for our diverse client base.
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IRC Section 1031, IRC Section 1033, and IRC Section 721 are complex tax codes; therefore, all the investors/clients/consumers are advised to consult their tax and legal professional for details regarding their situation on any kind of investment. There are material risks every investor should know, associated with investing in 1031 Exchange properties, Delaware Statutory Trust (DST) and any other kind of Real Estate Properties. The risks include tenant vacancies; declining market values; potential loss of entire investment principal; that past performance is not a guarantee of future results; that potential cash flow, potential returns, and potential appreciation are not guaranteed in any way; adverse tax consequences and that real estate is typically an illiquid investment. This material does not constitute an offer to sell nor a solicitation of an offer to buy any security. Such offers can be made only by the Confidential Private Placement Memorandum. Please be aware that this material does not replace the PPM.