Northern Bank brings giant piggy bank to Sudbury Branch to support local nonprofits
Northern Bank is excited to announce the launch of a community giving initiative at the Bank’s Sudbury location, featuring a custom, oversized piggy bank.
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Written by Michele Fitzpatrick. Originally published in the New England Real Estate Journal.
Good journalists know that in order to communicate information
effectively, they have to answer the who, what, where, when, why and how
questions in the first sentence of their article. So many of my recent
articles and social media posts have focused on who can utilize a 1031 Exchange, what types of properties qualify, when is the best time to exchange and most often, how the process works. However, it is equally as important to understand WHY investors exchange, so you can better determine if an exchange is right for your business and how you can benefit.
Here are some of the more common reasons why our real estate investor clients utilize 1031 Exchange:
Estate Planning:
Investment properties make up a large percentage of our clients’
assets, which will need to be considered when creating their estate
plans. Many clients are faced with situations where their heirs may not
want to or are not able to manage a particular investment property, and
the inheritance becomes a burden. Investors may utilize 1031 Exchange to
acquire multiple properties for each heir, smaller more manageable
properties in more desirable locations or opt for a vacation rental in a
retirement community for future use.
Diversification: Often, in conjunction with estate planning, investors plan to diversify their asset. They may have one large multi-family or commercial property and choose to purchase multiple smaller properties. This is beneficial when dividing assets for estate planning, or as a strategy to slowly ease out of investment real estate.
Consolidation: On the flip side, clients who have
many years left to invest may be in the position to consolidate their
multiple properties into one larger multi-family or commercial property.
This often alleviates management burdens, consolidates bills and
improves cash flow.
Increased Depreciation: The IRS allows an investor
to depreciate a residential investment property over 27.5 years, and a
non-residential property for 39 years. If the value of the investor’s
property has significantly increased as it approaches the end of its
depreciation lifecycle, it can be a powerful tax strategy to utilize
1031 Exchange and purchase a new appreciated asset. The depreciation
clock can start over again on the excess basis (or the profit). This
will ultimately increase cash flow in the new property. It is important
to talk with a tax advisor to explore this option in greater detail.
Cash Flow: So often investors are looking to
increase their cash flow, but location, property condition, property
size, city taxes and utility fees are hindering their income. Some
examples of how clients have increased their cash flow:
Management Relief: If anyone has been a landlord before, you understand the feeling you get when the phone rings in the middle of the night; tenant with no heat or a burst water pipe. Many seasoned landlords don’t want these management headaches forever. 1031 Exchange can help these landlords find a more suitable property to alleviate this stress. Often times this can be achieved by exchanging the troublesome property for a property that is newer or newly renovated, a condo with a management company, a vacation property with a rental and management company, a Delaware Statutory Trust or a NNN commercial property. These are just a few of the possibilities to explore to alleviate this burden.
Leverage: As I stated above, real property is
often the biggest asset people own. In the Boston area, properties have
continued to increase in value and these investors have equity tied up
in their investments. By exchanging and buying up in value, utilizing
the equity and borrowing funds, savvy investors will increase their net
worth and have highly valued properties in desirable locations.
Although it is so important to understand how 1031 Exchange works, it is more important to understand why it will work for you. Now that you’ve read through all the “Why’s,” it’s a good time to consider your property and your situation to see if there’s anything about your real estate investment and overall strategy you want to change, and how 1031 Exchange can help.
Contact Michele Fitzpatrick today at 781-569-1852 or MFitzpatrick@nbtc.com with any questions regarding 1031 Exchange.
Michele Fitzpatrick brings 16 years of banking knowledge and almost 18 years working as a real estate professional to her role as the Vice President of Northern 1031 Exchange. On the Northern Bank team since 2014, Michele has played an integral role in the growth and inception of this wholly-owned subsidiary.
In 2001, Michele earned her Massachusetts Real Estate license and began working for Coldwell Banker, where she focused on buying and selling her own investment properties. With a portfolio of multi-family and vacation rentals, Michele was able to leverage her assets by utilizing 1031 exchange. As the Massachusetts real estate market climbed to record levels in 2003, she shifted her focus to banking and finance, working with Sovereign through the merger of Santander and onto Stoneham Bank, where she worked in both Retail and Cash Management.
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Northern Bank is a full-service bank dedicated to providing practical, common sense financial solutions to help our customers live their lives and grow their businesses. From deposit products to loans to payment and collections services, we work hands-on with our entrepreneurial customers, both locally and across the country, to provide the financial support they need to realize their personal and business goals. Founded in 1960, Northern Bank has assets of $3.11 billion with 12 locations serving communities throughout Middlesex County. Northern Bank is a Member of the FDIC, and an Equal Housing Lender.
Contact us now to learn more about how Northern Bank can help you realize your goals and dreams.