Tax Benefits of IRC Sec. 1031 Tax Deferred Exchanges in Real Estate
Lifetime Exchange Benefits
Here’s the biggest advantage of doing a 1031 exchange? By deferring tax, you have more money in hand to invest in another property. In effect, you receive an interest free loan from the Government, in the amount you would have paid in taxes. A wonderful estate builder indeed! In most cases the tax bite on the profits of a real estate deal fall between 30% to 35% and by doing an exchange the investor get to roll all the profits into the next deal. Consider what a benefit that is over a lifetime of investing.
Despite this generous benefit some folks elect to sell and pay the taxes. This is often done out of ignorance on behalf of the investor of the broker the used to sell the property. Another reason could be the seller decided to finance the deal for the buyer. Depending on what side of the deal you’re on with this seller financing there are advantages. However, the tax still has to be paid but the question now is, when?
Continue reading »
Seldom, if ever were there a group of investors, either organized or disorganized such as we see and have experienced in the residential apartment house or Multifamily property market.
Most people I know got into that business by accident! After 18 plus years of dealing with landlords in their day-to-day business, assisting them in buying, selling and exchanging their properties. After many lengthy chats and informal surveys, I have come to the conclusion that most people got into this type of investment property by accident rather than on purpose.
Among the reasons most people finish there was they bought a new home and kept the old one. Some bought a house next door just so they could control who their neighbor would be, others helped a family member or a buddy with a loan and finished up getting the property instead of the loan repayment. There is also a considerable portion of this market who inherited their property and decided to continue in the business of their benefactor.
Continue reading »
A Suburban Multifamily Community
Never! I don’t believe you’d come to that conclusion if read the articles in the financial press, but real estate has always been, and continues to be, the ideal investment for the average American. While it’s true, the best real estate most of us will ever own is the real estate we invested in at the beginning of our investment process. It’s just like the trees we plant, the best ones were planted a long time ago and if we use the same care in managing both the trees and the investments we’ll have the shade and shelter we need for retirement.
It’s interesting that most investors I speak with now are cautious about real estate investments, Why they’re cautious after nearly four years of declining prices at least here in Orange County, CA and almost record low interest rates for mortgages is a mystery to me. In my humble opinion, this is precisely the time to make an investment even if it’s your first one.
Continue reading »
