10 smart moves for real estate investors and operators at year’s end
In the past year, commercial real estate has seen a dramatic rise in interest rates and a tempered slowdown in transactional activity. 2023 will provide an opportunity for well-positioned organizations to take advantage of the right avenues. Real estate owners and investors must make wise decisions now to be ready for next year.
As we close the books on 2022, here are 10 important year-end resolutions:
1. Keep REIT distributions on target
Now is the time to review distributions from your real estate investment trust. Have you met the dispersal requirements for 2022?
3. Watch out for disappearing interest deductions
Businesses that did not make the real property trade or business election have benefited from the interest limitation calculation adding back depreciation and amortization, allowing for more interest deduction. This changed starting in 2022, as the deduction for depreciation and amortization is no longer added back; this means businesses may need to adjust their projected taxable income for the year.
5. Leverage technology to maximize your tax function
Leveraging technology is key to maximizing your tax data and attributes; more structured data will allow for better decision-making and turn your tax function into a value-creation center. For example, in the current inflationary environment, tax attributes (like depreciation or net operating losses) lose value as the nominal value of a dollar decreases.
7. Be wary of debt modifications
Note that rising interest rates may push borrowers to look for ways to alter the terms of their debt. While the economic or cash flow benefit may be vital, borrowers must also consider the tax ramifications of cancellation of debt income.
9. Time to dust the cobwebs off your valuation policy
With interest rates up and transaction activity down, valuing your properties may not be as straightforward as in past years. Before you mark up or down your assets for year-end, stress test your valuation methodology to be sure that it still makes sense in the current market.
This article was written by Scott Helberg and originally appeared on Nov 17, 2022.
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