The next podcast for making the most of your investments is here!
Wanting out of your multi-family investment property? Today Marcia and I talk about the smart way to switch into a commercial investment property for those looking to further their investment opportunities.
Featuring:
René Nelson, Eugene commercial real estate broker
Marcia Edwards, Eugene residential real estate broker
Making the Most of Your Investment Properties – Part 3
Marcia Edwards: I’m excited about talking regarding the tax deferral available in real estate, it’s still there and it’s something that people are not always aware of. Let’s talk specifically about exchanging multi-family residential property into commercial property these days, using a tax deferred exchange, which is called a 1031 tax deferral.
René Nelson: Great, so I’m gonna give a real life example. I have a client right now that owns an 18-unit apartment complex in the Washington, Jefferson area. He’s owned it over 20 years, his property manager has managed it for 18 years, but he just wants out of multi-family.
He’s frustrated with rent control and all the eviction moratoriums and stuff, so he called me and he said, “I’m debating whether I wanna sell and pay the capital gains, or if I wanna do a 1031 exchange.” I referred him to a CPA. I said, “Your CPA is the ultimate authority, but I also have a calculator that I can do some calculations on.” So we’re gonna list and sell his property at 1.6 million, he has no debt ’cause he’s owned it for so long, and he’s basically depreciated every possible penny out of the property. So if he were to sell that property and pay the capital gains, he’d pay 500,000 in capital gains.
Marcia Edwards: Isn’t that phenomenal? Let’s defer that thing, how do we go about this? Let’s save this guy.
René Nelson: Yes, absolutely. So we are now looking at leased commercial property, so what that means is he’s gonna sell his apartment complex and simultaneous, at the same time, we’re gonna find a replacement property for him, and an Exchange Facilitator will be in the middle and kinda be the mediator or the person that holds the proceeds from the sale of the apartment and then pushes it forward to help buy the property he’s gonna find for replacement.
Marcia Edwards: So you use the term simultaneous, that intrigues me because I always think of the Up-leg and Down-leg of an exchange where you’ve gotta make a sale and then make the purchase. Is that the case?
René Nelson: Yeah, you’re spot on, but what I try to do is do them almost simultaneous so that it’s a smooth transition, because once you close on your Down-leg, so that’s the property you’re selling, you have 45 days to identify what you wanna buy, but I try to help my clients get ahead of the curve, and we’re actually identifying right now before we even list his apartment, ’cause we know his apartment will sell quick.
Marcia Edwards: That’s right. You’ve gotta understand the idiosyncrasies of the individual markets you’re targeting and René is the one to do that with.
René is available to answer your real estate investment questions. Schedule a 15-minute discovery call to better understand your investments and the market today.
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