How A 1031 Exchange Saved Me From Potential Loss?

How A 1031 Exchange Saved Me From Potential Loss?

Hi, I’m Marcus Rodriguez, an active investor, and owner of three investment properties. This day is special as five years ago, on the same day, I had done my first 1031 exchange, and the benefits that I received in these years make this a special day. Frankly, I had no idea how a 1031 exchange works or for the matter, is it a wise decision to go with one? You might have the same apprehensions. I hope my story will give you the required insight into this unique tax deferral strategy.

Why I opted for a 1031 Exchange?

As an investor, especially as a landlord, one thing you don’t want to indulge in is property management. After all, it requires a lot of time and effort, and I did not want to give away anything. This made me look for buyers for one of my investment properties. I was ready to sell it out on the first go. When I asked my advisor for the same, he introduced me to the 1031 exchange. He explained that if I go for a direct sale, I will have to pay the capital gains taxes. Whereas, a 1031 exchange lets you defer capital gains taxes indefinitely. When we calculated the potential taxes, it turned out to be a hefty amount. That was it. I wanted to save those more than a thousand dollars on taxes, which made me choose the 1031 exchange.

I suggest you the same!

Whether it’s the burden of property management or the rising operating cost of your property, you can get relief by opting for a 1031 exchange. Just trade your investment property for another property, and you’re done. Enjoy the tax benefits! And don’t forget to get your 1031 exchange properties list from a local broker or a real estate firm before investing.

A 1031 Real Estate Investment Trust investment could be an alternative.

A Real Estate Investment Trust or REIT owns and operates investment properties. REITs let you invest in a secure investment structure. REITs function on a model under which they lease properties to tenants and receive rents on those properties. Whereas, some REITs also lend money to real estate investors and earn interest on mortgage-backed securities.

Benefits of investing in a REIT – 

  • Transparency – REITs are highly transparent. They distribute the profits yearly and half-yearly.
  • Easy to buy and sell – You can buy or sell a REIT’s shares on the National Stock Exchange. Almost all REITs are listed with the Securities and Exchange Commission (SEC) and are sold on the National Stock Exchange.
  • Higher Dividend – A REIT must distribute 90% of its taxable income among its shareholders, which means you get a higher return on your investment.
  • Lower Risk – As compared to direct real estate investment, REITs have lower liquidity risk.

Varieties of REITs – 

  • Equity REITs – Equity REITs lease spaces to tenants and receive rents. You can buy shares of Equity REITs just like other stocks.
  • Mortgage REITs (mREITs) – Mortgage REITs are different from Equity REITs. Mortgage REITs lend money to real estate investors and earn interests on mortgage-backed securities.
  • Hybrid REITs – Hybrid REITs are a mixture of Equity and Mortgage REITs, which means they lease spaces to tenants as well as lend money to real estate investors.

“Our tax-deferred 1031 exchange programs can save millions in taxes, increase investor equity, and compound annual cash flow distributions and returns”