Right now we’re going to talk about the gift from the IRS which is the 1031 exchange.
Bob Nelson, Eugene real estate investment broker
Marcia Edwards, Eugene residential real estate broker
Marcia Edwards: Let’s talk a little bit about the 1031 exchange. This is a tough market to say, “I’m going to sell something, let go of it and grab something up quickly at the buyer around the corner.”
Bob Nelson: The 1031 exchange is one of the biggest and most solid gifts that exists in the US tax code. It’s your opportunity to sell an investment property. And using very specific characteristics, required by the 1031 acquire a replacement property of equal or greater value. Again, an investment oriented property. And to be able to defer the otherwise payable capital gains tax from the sale of the property, you just got rid of, and acquire the next one using all of your equity and doing it in a very safe and particular manner.
Marcia Edwards: It’s interesting because then you have the ability to use what could have been taxable at that time, into the purchase price of the property. So you’re always scaling up. And it’s fascinating how I’ve watched Bob navigate for so many investors over the years, in a way that gets them to the just right portfolio to have a passive income. Quit their day job and have a great happily ever after.
Bob Nelson: Well and that’s what you’re ultimately after. If you have an hourly job, you get paid for the time that you show up. And you’re productive so long as your employer stays in business. But what your objective is to create passive investment income. Income that will be generated whether you go to work or not. And that’s absolutely key in the tax deferred exchange allows you to do that. It’s much like an interest free loan from the government, for the amount of the capital gains tax that you would have otherwise paid. Again, you don’t have to pay it back as long as you exchange and then exchange again and again and again. The old adage, exchange swap til you drop, is an interesting adage, but in all candor, it is a viable investment strategy.
Marcia Edwards: And I wouldn’t encourage you to recognize, I don’t I say that IRS is giving us a gift because they’ll take it away as soon as they discovered that it is. Actually what it’s doing is creating a nice platform for you to go into retirement and be self sustained instead of not self sustained on the support of federal government. So it’s an opportunity to really run your retirement in a way that is independent and not an extra load on government or others.
Join Eugene, Oregon, real estate experts: Bob Nelson, Real Estate Investment Broker with Pacwest Real Estate Investments, and Marcia Edwards, Residential Real Estate Broker with Windermere Real Estate, daily at 5:30pm on KPNW for the “Real Estate Today” radio show.