Edited by Joseph Garnett, Jr.
170 Transaction Can Reap Positive Results for All
A 170 Exchange often benefits all parties of the transaction, and it also possibly impacts the economy as a whole. Sometimes, during a real estate transaction, only the seller receives any significant economic boost. The buyer usually may have to rely on a bank loan and, therefore, creates debt. However, with a 170 Exchange, everyone who participates in the transaction will possibly leave with a better economic perspective.
The Seller
As the economic benefit spreads through a 170 Exchange, the seller may be the first person to benefit. The seller may own an underutilized or underperforming property. Perhaps it is an old warehouse that is costing more to maintain than it is bringing in. Or it could be a weak investment property where the costs outweigh the benefits.
So, the owner decides to sell and utilizes a 170 Exchange. The seller can then remove the property from their portfolio for a lower cost, but reap the benefits of possibly receiving the full ideal use value as a tax deduction. This process takes a hard-to-sell property is off their hands, but they likely receive the full valuation amount as a tax deduction. By selling a property this way, all parties involved may benefit from the transaction.
The 170 Exchange generally impacts the economy positively, by potentially bringing cash to the seller and discounted assets to the buyer.
The Buyer
The nonprofit 501(c)(3) buyer may also benefit economically from this transaction. They can purchase a property to use, or as a portfolio item to boost their assets, at a reduced cost. The reduced price is vital as it enables the not-for-profits to spend their money wisely and keep as much as they can to continue doing their charitable work. The economic benefit of this transaction can mean that the charity has more money in its pocket and also has a property that they can utilize or enjoy the benefits.
The Community
The local community may also be fortunate enough to benefit from a 170 Transaction. The economic benefit from the seller can be felt throughout the city by wage increases, and better work conditions from the tax benefit. By legally reducing taxes, the seller may have the ability to spend more on workers and processes to ensure the business is growing.
Secondly, by selling a disused property, the area can be revitalized and bring in new work opportunities for locals. Revitalizing under-performing properties may also raise land values for locals and potentially provide economic benefits through that revenue stream as well.
170 Exchange Impacts the Economy
Lastly, the community may feel the economic impact of a 170 Exchange by the cash flow that comes with any property sale. A significant property sale in the local area may bring new income, possibly flowing through the community.
In general, a 170 Exchange impacts the economy and possibly benefits all parties involved in the transaction. Fortunately, the local community may also enjoy the financial gain. This process demonstrates how the economic impact of a 170 Exchange is positive. Real estate brokers wanting to do something good for the community should consider presenting the transaction to their clients.