#1031Exchange #SaturdaySchool
So last Saturday I had touched on Capital Gains Tax as it pertained to Home Sale of your primary residence. I had run out of retirement savings account for my "Don't let the Tax Tail Wag the Dog" series and so I am now gonna keep w/ the tax themed content but pivot to real estate related tax stuff for the moment as real estate is an exceptional way to increase passive income that you can then invest or build out more real estate.
WHO should be aware of Section 1031 for Investment Properties?
- "In real estate, a 1031 exchange is a swap of one investment property for another that allows capital gains taxes to be deferred. " - Investopedia
- This would be applicable to anyone that is involved or wanting to be involved in investment properties
WHAT do you need to know about Section 1031 for Investment Properties?
- There are specific rules to keep in mind in order to keep the IRS happy ... such as the properties must be considered "like-kind" in order for capital gains taxes to be deferred
- It is something to understand, as there is no limit on how many times or how frequently you can do 1031 exchanges ... unlike the Home Sale exemption from last week
WHERE can I learn more about a 1031 Exchange?
- So I started learning from Investopedia and then found out that they have companies specifically for 1031 Exchange - link is in the comments
- This can be a complex process and so having an expert, especially if this is your first time is probably worth the additional cost and expense
WHEN should I be thinking about 1031 Exchange for Investment Properties?
- If you are thinking about selling your current investment property and then reinvesting that money into a new investment property
- When you exchange your original and roll it into the next one you are able to delay any capital gains tax for the moment and use all the funds to reinvest it into a new property
WHY should I pay attention to 1031 Home Exchange w/ Investment Properties?
- Deferring capital gains taxes allows you to leverage the entire sale price into your next investment property which can then be done again and again to build on your initial investment.
- Then as time goes on you can snowball all your profits into hopefully one tax event that is at a long term capital gains tax rate many years later
HOW do I qualify for 1031 Exchange for Investment Property?
- Be sure to talk to your CPA or consider a 1031 Exchange Company
- The two key timing rules to be aware of are: 45 day rule to desginate on replacement property and then 180 day rule to close on new property (these both run concurrently)
Resource: Investopedia / Video: https://www.youtube.com/watch?v=BHdmRjvCDY8
P.S.: A good real estate resource is https://www.biggerpockets.com/ if you are looking to get into real estate. If real estate doesn't sound like your cup of tea, but still want to be involved in real estate you could always consier #REIT
#WeekendVibes #AdditionalIncomeStreams #RealEstate #TaxTail
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@celtic out of my budget in this current housing market as well. I'll stick to my ETFs. But last week it seemed like people were interested and so I made this one
Denise Marie Horton-Sawant@Shmiley
CTSSHAH great post
Damon Gwinn@damondamnit
Great post. Makes me somewhat want to return to real estate.
@Shmiley thank you!
@maybelline I'm new to real estate. If you are selling and realizing capital gains then waiting a year is less taxes. If you are doing a 1031 I don't think it matters if it is less than one year as you are just rolling one property into the next
@brendanschema honestly learning real estate might not be a bad hobby for you
@damondamnit I've stuck to my REITs because I am not handy b…See more
@ctsshah I would love to get into it. Something I will probably start to study as I start to build a bit more of a cash position.
I have some ideas😉 I will have to bounce them off of you and some others
@brendanschema @ctsshah if I could go back in time, I would have taken the real estate license when I was 18. The investment is so small, it will help protect you from major mistakes once you decide to buy property, and it would be a great student side hustle.
@financepillowtalk @ctsshah This is why you guys are so fantastic. Pushing me out of my comfort zone. I will look into it over the summer for sure. I am on a little bit of a time crunch currently 😂 But will learn ASAP📚Thank you!
@brendanschema mobile homes. Start there.
@financepillowtalk now that my family is all in NC we are probably gonna tackle real estate as a family unit 🙄
B
Any reit investments you would recommend to new investors, or a certain capital amount you eod start investing into it at
@dragonlvl333 I think $O is a popular one here on Public. I personally have a lot of my money in VGSLX. I'm intrigued by $IIPR
@TheSuzyQ that is awesome to hear! As someone without a background in Finance, it is nice to hear that a CPA is indirectly approving 🙌
B
Been doing research since markets closed on weekend
@dragonlvl333 perfect time for due diligence!
Damon Gwinn@damondamnit
@GenZAffordableProperties You future is bright if you are already learning about all this stuff!!!
@damondamnit Ya I got $IIPR in my Roth too. I just want that marijuana money and REIT money in a beautiful package
@Arkygirl43 You definitely know all the tricks and tips for real estate. Got any video ideas for me? Honestly running out of ideas that I could format into a short video
Hello everyone. @ctsshah , very informative post. Enjoyed the post and comments from everyone.
I had done real estate investments for some years. A great experience and a horrible curse at the same time. Lol
Truthful, though, it can be a lucrative investment with work.
I started buying properties from state & federal tax sales at a very affordable price. And like everything investing, you must do yo…See more
@ctsshah I haven’t had the chance to check out all your videos- you are not human!!!! Wow! You could talk about the real side of student loans- what the students are not told, different types of home loans out there. What the lending industry is looking for : credit scores, income history, debt to income, etc. Plus the idea that buying or refinancing is always the smart move. I would not buy righ…See more
@ReRo0921 I would totally read any posts you care to share about how to get started! Learning by doing is a tad hard with this kind of capital!! 🤔 I can’t just randomly start a YouTube, Instagram, or TikTok and just figure it out as I go!
@snutz82 so I ran into a doctor that was doing multiple rental properties and he swore by that website