September 2023 Report on the Real Estate Market From Your Friends at Northwest Atlanta Properties
1031 Exchanges Under Attack?
1031 Exchanges have been a staple of investors for decades and allow an investor to defer capital gains taxes when they sell an investment property and buy another. See our 1031 Exchange report for a review of the ins and outs in layman’s terms. It is also on our website in the drop-down under “Real Estate Sales.”
1031 Exchanges are under attack again. This happens every few years and is in the Biden Administration’s 2024 budget proposal. The original proposal last spring would limit the deferred amount to $1,000,000 for married filers and $500,000 for single filers, however, new comments appear it could completely eliminate the program. Originally this change would not affect most of the clients Northwest Atlanta Properties services, however, the 2nd comment would indeed be a huge change, stifling rental property sales.
The ability to conduct a 1031 Exchange is one of the ways our investors increase their net worth, and the recent proposal says this:
“This loophole lets real estate investors – but not investors in any other asset – put off paying tax on profits from deals indefinitely as long as they keep investing in real estate,” the fact sheet said. “This amounts to an indefinite interest-free loan from the government. Real estate is the only asset that gets this sweetheart deal.”
We like sweetheart deals for real estate investors. In the past, the National Association of Realtors and the entire industry have lobbied against any such changes and we expect to defeat this once again.
However, if you do think things will change, you may wish to have us sell your investment property, using current 1031 Exchange laws, and get into a property you may wish to own for the long-term or someday move into as a retirement property (possibly eliminating the capital gains when it’s sold as a primary residence in the future after you’ve lived in it). Or even cash out and pay lower capital gains taxes now, as the % of capital gains tax is also proposed to go up, being treated as ordinary income.
Specifically… give this some thought: If you own a rental, now might be your best time to upgrade to newer/better real estate investments (before deferred maintenance crops up) just in case it’s your last chance to exchange.
AS ALWAYS, talk to your tax consultant/wealth manager/estate attorney, etc. for tax advice. We are Realtors, not tax advisors.
What’s the sweetest deal in your area?”
In order for an investment real estate deal to be sweet it needs to either have appreciation potential or positive cash flow (preferably both) and to be properly managed which is where we come in.
Our local market is strong for well-priced homes and the best investments are new or newer homes in areas that may have been outlying at one point but are growing currently.
If you would like to sell an older rental and replace it with a newer one avoiding upcoming maintenance like new appliances, windows, or roofs, now is an IDEAL time to do a 1031 Exchange and make that adjustment tax-deferred pushing off that maintenance for another 7-15 years. We really like a new subdivision we found in Calhoun Georgia. Rough numbers: $260,000 purchase price for a NEW signal family home $135 HOA fees, $200 property taxes and we rented our first one in under a week after picking from 4 applicants at $1950 a month.
Virtually every forecast as to where the US home price would end up in 2023 nationwide has been adjusted dramatically upwards. The current 5-year expectation for appreciation indicates that anything bought today will see good appreciation:
Our Local Market Report – because it’s all Local
In the snapshot of “Year over Year Price,” we have a mostly rising market in prices (or holding steady) however, the number of sales is down. Fewer buyers and fewer sellers = a balanced market.
Realize that this is a snapshot, and in a market with relatively few sales several high-priced or low-priced sales can affect the median price dramatically.
For example, this month in Alpharetta we saw a $210,000 increase in median price. Let’s look closer at that: In August 29 of the 73 closings (40%) were above $1,000,000. In July for Alpharetta, only 23 of the 67 sales (33%) were above a million.
If a similar percentage of sales above $1,000,000 were used in August, the median price would have been $740,000 – still a hefty increase and probably a more realistic indicator seeing as how the median price in that zip code for the year so far is $750,000.
We use these charts every month to discover trends. For the best information let us prepare a professional pricing analysis for your property – we’ll use our actual experience and real-life human intelligence to determine your property’s value. We are happy to spend a few hours putting one together for you and your unique property. It’s far more accurate than online estimates from Zillow or other websites that use AI.
The number of sales in all the areas above dropped from 1009 to 826 (18% fewer closings) simply due to fewer homes for sale. Next month we expect a further decline as the recent spikes in interest rates have discouraged buyers from making offers and discouraged sellers from putting property on the market. High rates cause people with low rates not to sell and almost 90% of people who have mortgages, have rates under 4% interest. Fortunately, 38% of property owners own free and clear, and rates are of less concern to them.
Property Management Question we are often asked:
What services do you offer?
We offer 30+ years of experience and proven Top Rental Income services such as:
· Prepping the home for rent
· Advertising at our cost
· Showing the property
· Meeting prospective tenants
· Screening prospective tenants
· Complying with all fair housing laws
· Discussing the Pros and Cons of each tenant
· Getting your approval for tenants and input on all lease terms
· Effective Move in forms with pictures
· Rent collection and payment to owners
· Monthly and Yearly statements
· Maintenance tasks
· Contracting Experts to handle more advanced maintenance tasks
· Periodic Physical inspections
· Eviction proceedings when it becomes necessary (rarely)
· Complaint resolution
· Reliable and responsive communication
We provide all this and more – see the details on our website
Local and Fun Fall Events – Just click on the Links!
Pumpkin Patch Big Springs
Hayrides, Mazes, and More – Cagle Farms we may see you there!
And in Atlanta… The Monster Ball A Bollywood-style Halloween Party
We continue to appreciate your business and referrals to us, thank you.
You might notice from our signature below that our son Matthew Stott has joined us in the business having graduated from UGA (Go Dogs!) with a business degree from Terry College of Business.
We are thrilled to have him and grateful to continue another generation of Stott’s serving Sellers, Buyers, and Investors for many years to come.
We are so very grateful for your support of our family business, especially during this time of much fewer sales in our industry.
We appreciate you!
Mike and Donna Stott, Jon Burke, and Matthew Stott
Northwest Atlanta Properties