Today we want to tell you a bit about 1031 exchanges. First, what are they? If you want to sell an investment property, a 1031 lets you defer the capital gains tax and reinvest the net proceeds into a new property. It’s basically God’s gift to investors. We were a bit worried that 1031 exchanges might be on the chopping block, but it looks like they’re here to stay.
There are a few rules with these exchanges, but they are completely doable as long as you work with a professional. If you’re selling an investment property, you should consult with a Realtor who’s familiar with 1031s and a 1031 attorney to make sure you follow the guidelines.
We have a great 1031 exchange attorney that we use, so if you reach out to us, we can put you in contact with them. However, make sure you reach out before you sell your property because as soon as you sell, there’s a time limit.
“1031 exchanges are basically God’s gift to investors.”
You have 45 days to identify up to three potential properties you could buy. After that, you have 180 days to close on one of those properties. You have to invest in a property of the same kind, meaning it has to be another investment property, and it has to be of equal or greater debt. If you want to, you could buy two smaller properties to match the previous debt. Stuart and I did this last year.
1031 exchanges are a great way to multiply your wealth without bringing more money to the table. They are a great tool, and we don’t see enough people utilize them. With them, you can defer those capital gains taxes until you retire and fall into a lower income bracket.
If you’re a real estate investor and you’re interested in buying or selling properties, feel free to call or email us. We would love to help you build your wealth in real estate.