I have had some interesting conversations with property owners lately about whether they should sell now or wait. One of the unintended consequences of waiting until next year will be the tax rates sellers will have to deal with. As they say with the temporary suspension of the estate tax this year: if you are going to die, this is the year to do it. The same might be said if you are going to sell. The three most obvious taxes that will affect property sales next year will be an increase in Capital Gains tax; the introduction of the Medicare Surtax, which was buried in the newly passed healthcare bill; and the increase of taxes on carried interest (this still needs to be passed by the Senate).
These three taxes alone will increase the tax burden on a property owner by a minimum of fourteen percent or more. The question should also be: how much higher will these current taxes rise to pay for all of the debt we are accumulating? Also, if interest rates increase, this will affect the values of real estate.
All of these issues should be taken into account when discussing the sale of a property. Clients who think they can wait a while until values increase or rents go up may end up with the same bottom line after paying the taxes that are going to be required at the sale. If they want to know what to do with the money once they sell, well, right now Cash is King. If you cannot find a 1031 property, pay your current capital gains tax and wait for the right opportunity. They are out there, but they may not be next year.
Carmen has been a practicing commercial real estate broker with Saurage Commercial Real Estate since 2001. She is a graduate of the Louisiana State University (LSU) E.J. Ourso College of Business and the LSU Flores Masters of Business Administration (MBA) Program with a specialization in Entrepreneurship and Real Estate Finance Her experience includes past employment as Regional Director of Leasing at Commercial Properties Realty Trust the for-profit arm of the Baton Rouge Area Foundation. Carmen’s affiliations include Louisiana REALTORS®, Greater Baton Rouge Association of REALTORS® Commercial Investment Division, International Council of Shopping Centers, Commercial Real Estate Women, Certified Commercial Investment Member Institute, National Association of REALTORS®, and Urban Land Institute. She is also an active volunteer on the board of directors for the Baton Rouge Gallery, LSU MBA Alumni Association, Junior Achievement of Baton Rouge, and the Junior League of Baton Rouge.
Saurage Company, Inc dba Saurage Commercial Real Estate was founded in Baton Rouge in 1991 with the purpose of providing exceptional real estate services with an emphasis on commercial property and property management. Saurage Commercial Real Estate offers to its clients a full range of real estate services including brokerage, investment advising, development consulting, REO disposition specialists, asset management, fee based consulting, tenant representation, and buyer representation. The staff of professionals includes combined experience of 50 years, as well as CCIM Designees and Candidates and recipients of Master of Business Administration.
Chris Shaheen is a graduate of Louisiana State University where he obtained a Bachelor of Science in Business Management. Shaheen obtained the Louisiana Real Estate Sales License in 1995 where he began work as a consultant with Saurage Company Inc. as a specialist in development, land valuation, and financing.