Reasons to Consider a 1031 Exchange, Part 1

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1031Exc – Reasons for a 1031 Exchange
The questions here were received from interested 1031 exchangers visiting my website. I have chosen to leave the questions intact with their ambiguity, shorthand writing and misspellings so as not to act on the assumption as to what when unclear the questioner meant.

Reasons to Consider a 1031 Exchange, Part 1

Selling a mature property and diversifying, evaluating how the long-term goals of multiple owners have changed, increasing cash flow, estate planning, moving to a different location – these are some reasons for selling a property and exchanging it with a 1031. Before the IRS rulings in 1992 clarifying “like kind” for all asset classes of real property, from townhouses to retail centers, and office condominiums to apartment complexes, plus the IRS rulings in 2002 blessing the TIC structure and, in 2004, the DST structure, only investors absorbing large legal bills or doing very small exchanges could take advantage of the 1031 exchange.

Now investors can sell and exchange and have all their profits working for them, instead of the investors’ profits minus 25% tax on depreciation, plus 15% or 20% + 3.8% (Obama Care) capital gains tax – and if you are in a state with income tax, add state income tax. The great State of California can get you close to an upper 40 percent tax bite.

Question 1:
Interested in increasing cash flow

Answer:
You’re most likely to benefit when you have owned an investment property that has enjoyed appreciation for a long time. For example, twenty years ago, you bought a duplex for $250,000. Twenty years later it is worth $800,000. That’s a big gain! Executing a tax-deferred 1031 with the additional equity will usually produce more income reinvested than remaining in the original investment.

Question 2:
Purchasing with a 1031 exchange value $10M is better to purchase with that amount different small properties and why?

Answer:
When you’re pondering a deal with this kind of property, think of the old adage “Don’t put all your eggs in one basket.” … Once I went to an appointment already knowing that the prospective 1031 exchanger’s sale was $1.7 million, all cash. I was thinking about how best to split the $1.7 million. When the prospect said with a smile on his face, “ I only lost $14 million last year in the stock market,” I realized my split-up thoughts were no longer necessary!!

About Marilee:

Role of Marilee Hill, Registered Representative (RR)
DSTs (Delaware Statutory Trusts) are offered on a Private Placement Memorandum (PPM) regulated by Regulation D of the Securities Act of 1933. In order to provide an investor a PPM, a Registered Representative needs to have passed the Financial Industry Regulatory Authority (FINRA) Series 7 exam, also known as General Securities Representative Exam (GSRE).

The Registered Representative’s allegiance is to the investor in a PPM deal, and he or she is obligated to offer investments that are tailored to the investor’s goals and appetite for risk. It’s important to note that the Registered Representative is paid by the PPM’s Sponsor, and his or her responsibilities extend beyond settlement, unlike in a standard real estate deal. The RR has to monitor the investment and inform the investor about how it’s doing.

When Marilee entered into the securitized 1031 exchange field in 1999, she brought with her experience in land sales, office and retail sales and leasing. Previously, she had owned and managed her own apartment buildings and held real estate broker licenses in three jurisdictions.

But with that experience, Marilee also knows the “people side” of the deals: the Sponsors and their histories; and brings truthfulness and transparency to the table. Marilee has easy access to the Sponsors and the Broker/Dealer community, which is helpful in providing 1031 investment property for her invertors. Marilee believes, “My clients’ success is my success”.

Please contact us for your next 1031 Exchange strategy.

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1031 Exchange