Tax Strategies – Real Estate Investing – Part 14C - The 1031 Exchange III
This is Part 14 of my Real Estate Investing Series. You can view the first 13 Parts here:
Are you planning for your Future? Real Estate Investing – Part 1
Starting at Home! Real Estate Investing – Part 2
Maintain Your Leverage! Real Estate Investing – Part 3
Picking Your Investment Property – Real Estate Investing – Part 4
Location * Location * Location – Real Estate Investing – Part 5
Cash Flow Analysis – Real Estate Investing – Part 6 A
Cash Flow Analysis – Real Estate Investing – Part 6 B
Cash Flow Analysis – Real Estate Investing – Part 6 C
Cash Flow Analysis – Real Estate Investing – Part 6 D
Passive Losses – Real Estate Investing – Part 7
Gross Rent Multiplier – Real Estate Investing – Part 8
Capitalization Rate – Real Estate Investing – Part 9
Comparable Pricing – Real Estate Investing – Part 10
Rates of Return – Real Estate Investing – Part 11
Growth or Income – Real Estate Investing – Part 12
More on Rate of Return – Real Estate Investing – Part 13
Tax Strategies – Real Estate Investing – Part 14A
Tax Strategies – Real Estate Investing – Part 14B
Tax Strategies – Real Estate Investing – Part 14C - The 1031 Exchange I
Tax Strategies – Real Estate Investing – Part 14C - The 1031 Exchange II
If you read the Bare Bones Summary on 1031 Exchanges and some of the Questions and Answers in the Next Section on 1031 Exchanges I want to go over a few strategies you might use and talk about some key issues:
- Always Identify as your properties and get on with the purchase as soon as you can. You might even want to get in contract on the replacement property with in the 45 days to make sure you can get the property. Even if you are in contract on the replacement as day 45 approaches name some other properties as back ups. Keep you options open. Remember if your replacement properties get purchased by some one else or do not work out you will pay the Capital Gains Tax.
- For most investors naming the 3 properties will be the best option on replacement properties.
The 200% option has limited potential for most people. Where the 200% option might work is if you are selling one very high value property and which to by a number of lesser price properties. For example if you sell an investment property for $2,000,000.00, then pick 13 replacement properties valued at $300,000.00 as your dedicated replacement you will have to buy at least 7 of them within the 180 time limit. - The 95% system would seem to work about like the 200% system.
- If you want to divest of rentals and buy your dream home you might sell several homes and time the closings at about the same time. You could even lock up the dream home with options or a reverse exchange (if you are confidant of selling in 180 days). Use the equity to get the dream home, but it should be on the rental market for a year before you move in. Then you could turn you current primary into a rental property or sell it and take the exemption on the taxes when you move out. This will save you a lot of money!
- If you have owned an investment property for some time and the loan value is getting down, you have a lot of equity, and you have pretty much taken all the depreciation out of it this is a good time to sell. But when you sell if the risk is acceptable use the equity to buy several properties, as long as the total cost is more than the value of the sold property you pay no capital gains taxes and have upgraded and diversified your portfolio. You now have more property to depreciate and can write off more interest.
The next installment concludes the series, but with a very exciting announcement. So watch for it. I have another exciting series coming up.
I will have to bookmark this one so that I can catch up on all of them.