Private Equity in Real Estate – a Tax and Valuation Outlook For 2021 and Beyond

As the world slowly emerges from the shadow of Covid-19, there’s reason for investors to feel optimistic. Still, the pandemic’s aftereffects will likely linger well into 2021 for some real estate sectors.   

With an eye on helping investors identify opportunities through the next year as well as steer clear of the trouble spots, FTI Consulting, the global business advisory firm, has produced a detailed and farsighted analysis of how the pandemic and proposed tax regulations from the Biden administration are likely to affect real estate.

In a new report titled Private Equity in Real Estate – a Tax and Valuation Outlook For 2021 and Beyond,” FTI’s tax and real estate experts sugarcoat nothing.

For some hard-hit sectors, such as retail and office, very little suggests they will return to pre-pandemic levels anytime soon, according to the report. In addition, FTI Consulting digs into the possible effects on real estate investors if the corporate tax rate is raised to 28% from 21% and if Biden repeals like-kind exchange rules. According to the report, carried interests held for more than three years are currently taxed at preferential long-term capital-gains rates — an important loophole for real estate. If the administration gets its way, long-term capital gains for individuals with a minimum income of $1 million will be taxed at ordinary rates. 

But even in a pandemic-ravaged market, FTI Consulting notes the ways that investors can increase liquidity and protect value. FTI says, “Taxpayers can achieve significant tax savings and increased cash flow by reclassifying and accelerating depreciation of real estate assets through a cost segregation analysis.”

To read and download the full report from FTI Consulting that covers the above plus everything from how to leverage artificial intelligence for performing tax functions to ascertaining fair value for assets, please enter your information below.