Back again now with our special “Set for Life!” An in-depth look at how to get into real estate when you’re young, and generate income and wealth.
We’re going to wrap up today’s show with a look at one of the best tools available for every real estate investor. Attach tool, that helps you move from a small real estate investment to a bigger real estate investment, and, all the way up to an enormous real estate investment…while deferring your tax hit every time you sell one property and buy another.
It’s called the 1031 like-kind exchange. It’s part of the nation’s tax law. And it has huge benefits for every real estate investor.
And that’s true whether you’re buying a single condo, or 1000 unit apartment building. Let’s take a look at what it is, and how it works. And remember, I’m just giving you an overview here…if you really want to use the 1031, talk to a real estate attorney, an accountant, and your REALTOR®.
When you buy an investment property, it generates wealth in two ways. One, it creates revenue, every month when the rent comes in.
And two, over time the property will typically increase in value. So that over a matter of years or a matter of decades, the property will become much more valuable than it was when you purchased it. And you know what that means!
When you sell it, you may come away from the closing table with an enormous check. Now, if you just sell the place and don’t buy anything else, sure, you’ll have to pay taxes on your profit.
But, if you take that profit and use it to buy another investment, as expensive or more expensive than the one you just sold, you can pour the entire profit into the new investment, and defer the taxes.
That means that if you make $100,000 profit on your first real estate investment, you can pour the entire $100,000 into your next one…Instead of just what’s left over after taxes. It is a huge benefit to Real Estate Investors in America. Because it has helped many people go from a single condo, to a 4-unit building, to 40 unit building, and on and on.
And you only pay taxes on it at the end of the line. When you’ve decided to sell your real estate investment and not buy another property.
Now using the 1031 like-kind exchange is not for amateurs. This is the big league. So, you’ll want to work with a experienced real estate attorney, and accountant…as well as a REALTOR® who knows investment properties inside and out. You can’t just do it on your own. Because, for instance, after you make the profit on your first place, that money will have to be held by a third-party, until you purchase your next real estate investment. So, talk to your REALTOR® about all your investment plans, and ask them which attorneys and accountants in your area will be able to guide you through a 1031 like-kind exchange.
You know many people have real estate Investments. They might buy a house, but keep the one they were living in and rent it out. And that’s great. But if you really want to grow as an investor, and create a really big real estate portfolio, experts say the 1031 like-kind exchange is the way to go. It is the big leagues of real estate investing. And there’s no reason, that you can’t use it, on your path to being “Set for Life.”