The 1031 Exchange has been around since the 1920s, yet far too many people aren’t aware of all options that exist with this type of transaction. And not knowing can cause you to miss important deadlines, which will compromise your investment portfolio’s ability to keep your money safe for the long term. Tune in to this episode and hear what David Moore of Equity Advantage has to say about all the 1031 exchange options available to you as a property investor. Whether you’re buying, selling, or building, this is information you need to know.
Are 1031 Exchange Options Only For Large-Scale Investors?
1031’s have been around since the ’20s. It’s one of the tools that is for everyday person. I mean, you don’t have to have a lot of money in exchanges. It’s very inexpensive. When we started Equity Advantage in 1991, we charged $1,000 to set it up and $500 for each addition relinquished or replacement property in a simple delayed exchange.
Today, you know, for years we actually went to half that price as the market changed. In ’90, ’91, there weren’t many companies around, you had a lot of people come into the game and through the ’90s, the early 2000s, with the crash, we had a lot disappear. But, really the cost of the transaction’s nominal. Typically, today you might be looking at 750 or so to set something up for a delayed exchange, so it’s one of those things that you don’t have to have the high-powered lawyer to get the transaction done. You don’t have to have the CPA that you’re paying the big dollars for. We always want you to have these people. I think to be successful you need a good team of competent professionals, people you’re paying for opinions. Not people you’re paying to learn on your behalf.
So, those people are definitely indispensable, but it’s one of those things where it’s not this big secret. 1031’s not a secret, it’s been around forever. Unfortunately, still people don’t understand that it’s here, and we still have transactions where people are calling up the day after something’s closed and it’s too late. But in general, most of that world, the investment world, is aware of 1031 and what it’s done in helping people grow on their investment portfolios. Lot of time people’s first investment properties are their primary residence. They have it, they move out, and if they keep that property as an investment for more than three years after moving out, assuming they were there for more than two previously, they would have the ability to use section 121, the universal exclusion on a home sale if they sold within three years of moving out.
But after that, that property’s an investment. And they’re going to typically snowball that into the… maybe you get out of the one single family rental and do a couple, and you end up in a plex, and you end up with an apartment, then you end up with an industrial or something else is sort of the typical MO of the investor. But, it’s great because anybody can use it. We’ve got transactions that might be $20,000 in gain on a $50,000 property, $30,000 property, believe it or not, they still exist, just not on the west coast.
How 1031 Exchanges Work to Keep Your Money Yours and Keep it Working for You
But, as you get bigger, small, large investors, hey if you want to keep your money yours, keep it growing. 1031’s there for you. And, unfortunately we lost personal property with tax reform. And I think that was a situation where everyone was saying, “Hey, you know, we don’t want to have the wealthy take advantage of stuff.” So, they’re thinking, okay, personal property, cars, planes, stuff like that. The 1%ers. And maybe that was true for a lot of those. We had a lot of fun doing some high-end stuff.
But today at least we’ve got 1031 for real property, so use it while it’s here and keep building your portfolio. Keep your money yours. Keep it working. And, it’s a great tool whether you’re talking a delayed exchange, sell first buy later, reverse exchange, or your buying first selling later, or doing improvement exchanges where we’re going to go out and buy something and build exactly what you want. All those things are great options for people.
They’re all going to help you get where you need to go. No such thing as a dumb question. Call up, ask, talk to us about what you’ve got going on. We’re happy to help you out.
We might have a situation where you’re combining your portfolio property into a single property. We call those blended transactions. So, what would happen in that scenario is we’re going to have a series of properties sell before the acquisition happens, make the acquisition, whatever in that portfolio that has yet to close would then come in via reverse exchange. So, we can actually combine a delayed and a reverse and stretch out the entire timeline to almost a year. Get those things done.
Keep in mind, reverse exchanges, we’ve got safe harbors that are there. Some of those rules are not hard fast for delayed. We’ve got pretty rigid guidelines that keep things in place. I will argue that there’s… I doubt there’s a 100 questions with black and white answers in this tax code. It’s rarely a question whether you can or can’t do something, it’s how you’re going to do it. So really, when you’ve got questions, you’ve got ideas, call, ask. I mean, that doesn’t hurt you or anything. There’s no cost or obligation, we’re happy to discuss transactions, whether they’re past or present or future. We’re going to work with you and help you, hopefully, get where you want to go.
Navigating 1031 exchange options takes a professional, and you can count on the whole team at Equity Advantage to help. Your investments are just too important not to have an expert on you team. Give the folks at Equity Advantage a call, 503-635-1031, to get started!