A single investment in a real estate asset can be large and constitute a significant portion of an investor’s assets, bringing a high level of concentrated, property-specific risk. Real estate is generally illiquid and, if held for a long time, may have a significant unrealized taxable gain.
A seller considering sale or monetization of a property should consider its current value relative to historical and expected value in the future, taxes on any transaction, availability of credit, and interest rate levels.
Strategies to consider include:
- Mortgage financing can be an attractive strategy to raise funds without loss of control of the property. With a nonrecourse loan the lender’s only recourse is to seize the property if the loan is not paid. The borrower effectively has a put option on the property.
- A donor-advised fund or charitable trust can allow the property owner to take a tax deduction, gift more money to the charity, and influence the use of the donation.
- A sale and leaseback can provide immediate funds while retaining use of the property.