Exit Strategies: Best Practices for Selling a Self-Storage Facility

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Planning Is Essential

In addition to providing what we may look back on as a favorable capital gains tax rate of only 15 percent, the Internal Revenue Service offers you the opportunity to indefinitely defer the tax consequences of any sale of a business property according to Internal Revenue Code Section 1031. This procedure is commonly referred to a 1031 or Like-Kind Exchange.

Property under a 1031 Exchange, if used for investment or business purposes, can be exchanged for “like-kind” properties. The rules concerning what constitutes a like-kind property are somewhat liberal. As far as timing is concerned, replacement property must be identified within 45 days and the actual purchase must close within 180 days. With so many investors having recently sold real estate for a profit, there are many in the market looking for “exchange” properties to buy. This factor has been partly responsible for rising valuations of investment properties as buyers have been outpacing the supply of sellers of investment properties.

Owners can increase their liquidity and sell shares as they need funds or never sell shares at all and avoid gains on share appreciation by having the shares go to their estate and having their heirs inherit the shares at what is know as a “stepped-up basis.” Once again these tools require not only professional guidance, but also taking steps in advance of selling.

Jeffrey Supnick is president of Supnick Real Estate Co. and is a 25-year veteran of the self-storage industry. Supnick Real Estate Co. is a full-service firm devoted exclusively to self-storage brokerage, consulting and property management services. For more information, call 856.722.1414; e-mail jeff@supnick.com; visit www.supnick.com.

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