The tax strategy you NEED to know about!
We are living in an unique time. So many of us were to send home to work 2 years ago....and we are still there. This opens up the opportunity to live farther from your headquarters, move to a cheaper cost of living area (for the same salary), and to change the climate you live in. Many people simply needed at home office space too.
We might have needed to make a move ourselves, but also many of our renters needed to re-evaluate their living space as well.
And when renters move, investors need to react too!
Trading up one rental property for another is a common practice that investors use to move with teh market and also to get into larger projects. But the idea of selling one's property is often dimissed due to capital gains that would need to be paid.
But here is a strategy that might just work for you!
Section 1031 of the federal tax code enables sellers to defer gains on the sale of property used for investments provided another is acquired. It is much like a sale followed by a purchase with a few rules attached. A 1031 exchange allows investors to accomplish many investment goals, such as greater income potential, less management responsibilities, relocation, consolidation, diversification and acquiring a future retirement home.
Listen to this week's episode of the Lady Landlords Podcast here to learn more about how 1031s work!
🌟 You need a qualified intermediary to facilitate the exchange.
🌟 Beginning at the closing of the old property, you have 45 days to identify a replacement and a total of 180 days to acquire it.
🌟 To maximize the tax deferral, you must acquire replacement property of equal or greater value and equity.
🌟 Both properties must have the same owner.
🌟 The exchange must be set up before conveying title of the old property to the buyer.
Just another great strategy every successful real estate investor needs to master!