Ep #22: Real Estate Tax Advantages: Exploring the 1031 Exchange

Today we delve into the tax advantages of real estate, with a focus on the 1031 exchange and the exchange of rental or investment properties. The primary objective of the 1031 exchange is to enable the acquisition of additional real estate while deferring taxes on non-residential properties. To ensure a complete deferral of the capital gain, certain prerequisites must be met. In this episode, I will break down what these prerequisites are and more, so that you can ensure you’re making the most of your real estate investments moving forward.

You will learn about the concept of “boot” within the context of a 1031 exchange and why it is essential to work with professionals who possess expertise in this field in order to execute a 1031 exchange. Listen in as I explain why collaborating with individuals who understand the nuances of 1031 exchanges, such as qualified intermediaries and knowledgeable real estate brokers, is crucial, and what you need to know about reverse 1031 exchanges, which can pose challenges for investors who lack substantial cash reserves to purchase a property outright.

What You’ll Learn In Today’s Episode:

  • What the 1031 exchange is.
  • How to utilize the 1031 exchange.
  • Several things to have in place to ensure you can fully defer the capital gain.
  • What “boot” means in the context of a 1031 exchange.
  • The rules put in place by the IRS that you must abide by.
  • What the “3 property rule” is.
  • How to identify a replacement property.

Ideas Worth Sharing:

  • “The idea with the 1031 exchange is to allow for the acquisition of more real estate.” – Nick Painz
  • “If you’re looking at executing a 1031 exchange, make sure that you’re working with somebody who understands 1031 exchanges, working with a company already that is a qualified intermediary who can give you guidance on this and a real estate broker who understands the process of a 1031 exchange.” – Nick Painz
  • “If you’re not a cash-heavy investor that has the means to buy the property outright, reverse 1031 exchanges can be really difficult.” – Nick Painz

Resources In Today’s Episode:

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