Ep. 85 | 1031 Exchange Update
Download MP3In this episode of the Teaching Tax Flow podcast, we jump into the intricacies of 1031 exchanges, a topic vital for anyone looking to optimize their real estate investments.
Focusing on the practical aspects of 1031 exchanges with guest, Scott Saunders, who provides a detailed explanation of the associated rules, from identification to replacement property guidelines. The conversation unearths valuable tips for investors at all stages, underscoring the potential of 1031 exchanges to enhance investment portfolios substantially.
Key Takeaways:
- 1031 exchanges allow for the deferral of taxes by swapping one investment property for another without the proceeds hitting the investor's bank account.
- Key rules for a successful 1031 exchange include not receiving cash from the sale and ensuring the exchange is set up before the property closure.
- Identifying replacement properties requires adhering to set time constraints: 45 days to identify and 180 days to complete the exchange.
- Like-kind properties are broadly defined in the context of 1031 exchanges, allowing for flexibility in investment property types.
- Partially deferred exchanges are an option, and investors can introduce outside cash to balance a decrease in mortgage value for a newer property.
Notable Quotes:
- "A 1031 exchange at the most basic level is just this. I take a property that I've held for investment or used in my business. I transfer to a buyer and then I receive back other like kind property that I hold for investment or use in my business." - Scott Saunders
- "If you haven't looked at an exchange, you gotta at least look at it, deal with your tax advisor, number one, right. That's important. Get with a knowledgeable, qualified intermediary and at least see if it makes sense for you." - Scott Saunders
- "The misconception that is out there is I have to kind of go the same type ... And that's not true at all. Like kind property ... It's any type of property that you hold for investment." - Scott Saunders
- "That's why it's a great tool, because it allows you to start with something really small, roll it into something bigger and bigger and bigger. And 30 years down the road, you've got this substantial real estate portfolio that all started with a one little single family home." - Scott Saunders
