Our team here at Diversified Investment Strategies is here to fill you in on the latest 1031 exchange news, facts, answered questions and details on how to make one work for you. However, reading about how a 1031 exchange works, and what its benefits are for real estate investors, is different than reading real world examples of how investors have saved thousands in real estate transactions by using a 1031 exchange. So, we’re here to give you a few concrete, real examples that Bigger Pockets shared!
Example One
An investor purchased an 81-unit apartment building in 2013 and paid $3.1 million. He improved the building and sold it for $5.5 million two years later. He netted a final profit of $2,000,000. This may have caused this investor to pay close to $600,000 in capital gains taxes. (Please consult your CPA, taxes may vary by state and each tax payer’s situation will vary.) Instead, he used a 1031 exchange and invested in two new apartment buildings and an upscale office with his earnings.
Example Two
An investor purchased a newer single family home for $70,000 in 2012, a foreclosed property that quickly climbed in value. He sold the home two years later for $135,000, with almost $60,000 in profit. According to this investor, he would have had to pay close to $15,000 in capital gains tax plus an additional $3,000 for the recapture of depreciation. Instead, this investor spent a total of $600 on the 1031 exchange process and rolled his entire profit into the purchase of a newer, larger single family home and a mobile home on one acre of land.
As you can see, by using a 1031 exchange, these two real estate investors worked their way up to bigger and better investment properties, or more diverse investment properties, rather than giving away a huge chunk of their net profits to capital gains taxes. A 1031 exchange may work the same way for you!
To complete a 1031 exchange, our team of diverse professionals can help guide you through the process to see if this is a viable option for you. For an exchange to be 100 percent tax deferred, the investor must acquire a replacement property that is of equal or greater value and spend all of the net proceeds from the relinquished property. A specific timeline must be met, and an intermediary must hold the cash during the 1031 exchange timeline.
Aside from having more to invest, other benefits of a 1031 exchange may include less management duties, more diversification, greater earning potential, pricing flexibility, trade up options, and consolidation, such as with a DST, NNN Triple Net or 721 UPREIT.
If you’d like more information on how 1031 exchanges work, what options you may have, and what benefits you might enjoy, visit our website at www.Diversified1031.com and contact our team at Diversified Investment Strategies! We are here to help!
Bryan Hakola
Diversified Investment Strategies
Visit Our Website
Learn About Your Investment Options
Become Our Facebook Fan
Follow Us on Twitter
Connect on Linked