Wouldn’t you rather go to Tahiti? Are you a landlord with a rental property that has appreciated significantly in value? Are you ready to cash in on those winnings and take that trip to Tahiti?
Before selling your property, check with your accountant that
tell you that you will pay $ 60,000 in principal
Earn taxes for Uncle Sam. Your accountant will also tell you
that adding another $ 20,000 to your income from that sale is
called recovered depreciation. This will collide with him
next tax bracket and sentence it on April 15 to send
the IRS a check for maybe another $ 7,000.
Are you still ready to sell that property?
It seems that this trip to Tahiti will be sometime in
the far future …
But wait! You decide to consult with your real estate agent and then
Find out about a 1031 exchange to defer your capital gains.
Your real estate agent tells you if you buy another type of similar rental
property of equal or greater value, they won’t hit you with
the income tax on the sale. All of that is fine and fine but
doesn’t really get you out of the associated headaches
with collecting rent, keeping your unit occupied, finding
clean / elegant tenants who will not trash the place, or
prevent you from getting that 2am call to fix an overflow
lavatory. To top it off, now you have to pay more in
property taxes and must charge a higher rent.
Hmm … maybe this idea is not the ticket to that South Pacific
neither is paradise.
This is the dilemma I heard from my financial clients again
and again. They were frustrated and felt trapped in their
Current situation. So what is a frustrated income property?
owner what to do? After much research and hurdles, I found
the perfect solution that has changed my life
customers and removed stress to bring enjoyment of life.
For anyone who is tired of owning and has a
rental / commercial property that has gone up a lot in value,
A 1031 exchange for a tenant in common property can be your
There are very specific rules to follow set by the IRS, and
the entire detailed process is the subject of a future
article, but here is the gist:
1-Sell your current income
2-Before the closing of the guarantee deposit, declare through a
Intermediary (also called usher, which is a
qualified third party) who intends to do a 1031 exchange
in a tenant in common property;
3-Work with a recognized
company to identify a property you would like
buy an interest in;
4-At the closing of the escrow, your
the income is transferred by the usher to buy
your proportionate share of a larger “A” rated commercial ad
5-You can choose a business center, a
high-end office building or similar property; and finally,
6-You get a deeded interest in this property, so you can
keep it, resell it, pass it on to your heirs or even give it away
to charity after your death.
The way this works is all new fractional owners, or
The “joint tenants” hire an excellent management company to take care of
all property management tasks. The company finds and
maintains high-quality tenants, performs maintenance and
upgrade, pay property taxes, and drive around the clock
up to date the crises that arise. Probably the three most important
The factors in this whole process are:
1-Your choice of company
offering the properties for sale;
3-the management company.
Make sure each of the three parts is top-notch
tracking records. Anything less could spell disaster.
When this 1031 option is successful, your benefits
Deferral of all capital gains,
A monthly contractual income (generally based on a yield of 6-7%
Depreciation of buildings for tax savings,
Unlimited potential for property appreciation, and
No more property management headaches.
Goodbye to tenants, trash, and toilets!