1031 like-kind exchange, financial advisor, investing

How to Make the Most From Real Estate Investments With a 1031 Exchange

You’re a Real Estate Investor Considering a 1031 Exchange to Defer Tax on Gain

You own commercial real estate with all of its rights and responsibilities. Perhaps you want to cash in on the equity you have built up in the last decade or you are through dealing with tenants. You’re ready to create income without having to work; that’s retirement. Some tactics that may maximize your return are: get out of the market as close to the top of the cycle as you can, defer taxes on capital gains, redeploy gains through an IRC §1031 Like Kind exchange into property that provides passive income from a professionally managed property as well as diversification of your portfolio.

Market cycle

A real estate market cycle lasts about 10-12 years. As an example, in the greater Seattle area, we are at or near the top of the cycle. Consider the cycle characteristics: seller’s market, demand is high, inventory is low creating bidding wars and rising prices.  Your risk tolerance, time horizon, and opportunities factor into a decision to sell. As a commercial real estate professional in Seattle for over 30 years, I recognize that now is at or near the top of our cycle. If you are considering selling, it may be time.

Capital Gains Tax Deferral 1031 Like-Kind exchange

You are re-evaluating how real estate fits into your portfolio and you know if you don’t take advantage of the 1031 exchange, a big tax bill may be due. But how do you find the same kind of property with the same level of debt to equity? And, how do you diversify if you have to buy the same kind of property? The rules seem daunting.

A Viable Exchange Property

A Delaware Statutory Trust (DST) offers opportunities to convert the capital gains from your commercial property sale and diversify real estate holdings by purchasing an interest in one or more qualifying properties with similar equity and debt ratios. A DST is an alternative for replacement property for accredited investors seeking to defer capital gains taxes through the use of a section 1031 tax-deferred, like kind exchange.  Review our 1031 DST Properties here.

In a DST, investors own a fractional interest in one or many institution quality, professionally managed, commercial property such as retail malls, multi-family housing, and industrial properties in diverse geographical locations. The DST may provide cash flow income, tax benefits, appreciation, and reduced risk through diversification. A DST allows you to redeploy your money. You keep your hard-earned money working for you.

Complexity

Complexity is the enemy of execution: inertia, decision fatigue, and less complicated alternatives may impede long-term strategy. Investing can seem complicated and working through the intricacies of the Internal Revenue Code overwhelming. That is why building a relationship with a proven, trusted financial advisor who understands the tax-saving benefits of investing and can walk you through your investment options is so important. An experienced reliable professional will find the most tax-efficient strategies to help you keep more of what you make to reach your financial goals.

 

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