Priced-out investors seek distant properties

Real estate is still hot. Some markets across the country continue to experience double-digit-percentage appreciation.

Because of escalating prices, investors are using new strategies. Instead of flipping foreclosures, investors are looking to purchase pre-construction units and resell them at the table on settlement day to another buyer.

Still others are beginning to take their profits and move their investment holdings to other undervalued communities away from home.

The market in Washington and some other cities has priced out not only some would-be homeowners and move-up buyers, but investors, as well.

So where can you get a good deal these days when you can’t afford the market where you live? Think long-distance investing.

Real estate has demonstrated its resilience throughout the years, and investors are banking on finding land and homes far from their own neighborhoods to continue building their real estate portfolios.

Keep in mind, an investor can make money off real estate in several ways:

• Purchase fixer-uppers: Invest, fix up and flip.

m Purchase new and flip when construction is completed.

m Purchase, move in and hold.

m Purchase and offer for rent.

Most people gain equity through buying and moving in, but in an overheated market, even fixer-uppers are priced high.

Look elsewhere. There are plenty of undervalued/fixer-upper/foreclosure/vacation properties available in this great land. You just have to be willing to look farther than across town to buy them.

An investor friend of mine recently sold one property in the Washington area, resulting in nearly $300,000 in profit. To delay capital-gains taxes, he went to identify properties outside the region to purchase using the Internal Revenue Service 1031 Exchange option, named after a section of the federal tax code.

In simple terms, an IRS 1031 Exchange allows investors to defer capital-gains taxes when they sell one or more real estate properties if they reinvest all the proceeds into another qualifying real estate investment. For more details, consult www.realtor.org/libweb.nsf/pages/fg408.

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