Some Oregon manufactured home community owners may have spent decades building reliable income—but without a clear transition plan. This uncertainty is especially common if their children have no intention of taking over management. The park may represent both their largest asset and an essential component of their retirement plan, which may lead to owners feeling caught between wanting relief from management while needing to preserve dependable income.
Today, a convergence of tax policy and buyer demand has created a potential opportunity worth understanding.
Recent tax legislation, has drawn increased attention from institutional and private buyers seeking bonus depreciation and stable, income-producing assets. This increased demand has contributed to a competitive acquisition environment and may support favorable valuations for certain Oregon manufactured housing communities.
Just as important, Section 1031 of the Internal Revenue Code allows eligible real estate investors to defer capital gains taxes by reinvesting proceeds from the sale of investment property into qualifying replacement real estate. While individual circumstances vary, this strategy has historically been used by investors trying to preserve equity and transition into more passive forms of ownership.
Consider a hypothetical example for illustration purposes only: An owner sells their park for $3.5 million. Because many long-held parks are substantially depreciated, assume a taxable gain of $3.0 million. Without a 1031 exchange, assuming a federal capital gains tax rate of 23.8% and Oregon state tax rate of 9.9% the owner could owe approximately $1,011,000 in combined taxes, reducing net proceeds to about $2.49 million.
By completing a properly structured 1031 exchange, the owner could defer those taxes and reinvest the full $3.5 million into a diversified portfolio of professionally managed real estate assets, such as interests in institutional-quality properties. Over the previous 12 years, the real estate investments approved through our due diligence process have paid an average distribution of approximately 5.15%. Using the illustrated exchange amount of $3.5 million, at a 5.15% distribution rate, an investor would receive $180,250 per year.
Please note that these investments are securities offerings. Distributions vary by offering, are never guaranteed, and may be reduced or suspended at any time.
For some owners, this type of transition may provide an opportunity to preserve equity, maintain current cash flow, and reduce or eliminate day-to-day management responsibilities—particularly when there is no next generation planning to assume operational control.
Owners spend decades building value. The next step is evaluating how their real estate holdings could be aligned with their long-term retirement goals, risk tolerance, and desired level of involvement.
If you would like to better understand how these strategies may apply to your specific situation, you are invited to schedule a complimentary consultation. During this conversation, we can review your property, quantify the potential tax considerations, and outline available transition strategies so you can make an informed decision.
Schedule here: https://linktr.ee/jon_taylor
This material is provided for informational purposes only and does not constitute an offer to sell or a solicitation to buy any security. Individuals should consult their tax and/or legal professionals regarding their situation before making any investment decisions. Any investment opportunity will be offered only through formal offering documents and is available only to investors who meet applicable suitability and accredited investor standards. Investing involves risk, including the possible loss of principal. Past performance and current cash flow are not indicative of future results.
Securities offered through Lighthouse Capital Group, LLC, Member FINRA/SIPC.
Jon Taylor
Registered Representative
DIRECT: (440) 463-0128
TEXT: (626) 773-3629
BRANCH PHONE: (626) 564-1031 | FAX: (626) 564-1024
1055 E. COLORADO BLVD., SUITE 310, PASADENA, CA 91106
Securities are offered through Lighthouse Capital Group, LLC, a Member of FINRA, SIPC.
JRW Investments, Inc. and Lighthouse Capital Group, LLC do not provide tax or legal advice. When completing a 1031 exchange, investors may incur tax liabilities if their transaction does not comply with IRC section 1031 requirements. When considering any investment, please consult with your tax and legal advisor(s) regarding the specifics of your situation.
