Real estate investing can be a great way to build wealth, but it can also come with hefty tax consequences. Thankfully, a little-known loophole in the tax code enables investors to sell one property and reinvest the proceeds into another while paying little to no taxes on the gains.
This Wealth Building Loop Hole is called a 1031 Exchange. In this blog, we will talk about 1031 Exchange and how you can use it to continue building your real estate portfolio without adverse tax consequences!
Why does the 1031 exchange matter?
You can defer taxes your entire life with the right investment strategy and extreme discipline. 1031 exchange is the Wealth Building Loop Hole that investors like yourself are capitalizing on. If you can find a good investment vehicle that you can exchange using 1031 throughout your life, you will be well on your way to building wealth with minimal or no tax consequences. There are many different types of investments, but one of the best ways to defer taxes is through a private real estate offering known as real estate syndication.
This is how you keep your wealth in your family.
The rich get richer because they have tax-deferred investments that continue to grow and compound throughout their life. The idea is to create a vehicle that moves the capital from one investment to another without being taxed on the gains.
1031 exchange is how you can do just like the wealthy families do to keep wealth within your family for generations to come. This is a tax deferrable exchange, not a tax-free one. If you're persistent and disciplined, you can continue to use this strategy throughout your life and maintain this money in your family so that future generations can inherit a step up in basis.
The step up in basis means that "Tax Can" that you are kicking down the road consistently through 1031 after 1031 will go away upon your death. Your family who inherits the assets new base will be the current value of all the assets involved in the 1031 exchanges with little to no tax consequences. There are no other tax benefits for investors that are as advantageous as this technique for investors all across the country.
You may ask, what about depreciation recapture? If you invest in a deal and then sell it, you may be liable for depreciation recapture. The rewarding thing about taking a disciplined approach to your investment strategy is that all that liability for depreciation recapture also goes away.
Real estate investors looking to use a 1031 Exchange to defer the capital gains tax on the sale of one property and reinvest those proceeds in another property can do so an unlimited number of times as long as they follow certain IRS guidelines.
If this article piqued your interest in investing in real estate, then congratulations:
Download your Operations Manual Here. In the Operations Manual, you will learn how passive investors leverage Syndication to create Passive Income to grow their wealth for their future generation and create the ability to make an impact!
For more information on getting involved in a value-add multifamily syndication deal, don't hesitate to contact me at Hutch@HSquaredCapital.com or Dr. Heath Jones at Heath@HSquaredCapital.com. You can also visit our website at www.HSquaredCapital.com. We'd be happy to answer any of your questions and help get you started on the path to financial success through multifamily investing!