1031 For Rental Owners

How a 1031 Exchange Investment Opportunity Can Reduce Your Property Management Headaches

We hear all the time from people who are sick and tired of dealing with rental properties. And we understand the renter nightmares: the issues with collections, maintenance, property management, evictions, the squatters, the 2 am call about the burst pipe. The nightmares are plentiful, but what about the remedies? Selling your rental properties has its own share of issues, when they’ve depreciated over the years, where large capital gains taxes loom, and where you'd be bleeding your profits out to Uncle Sam.

If you're looking for a way to get out of these properties, avoiding those capital gains, letting go of the management issues, and still having the income from multi-million dollar real estate projects, a 1031 Exchange investment opportunity just may be the right solution for you.

Some Current 1031 Exchange Properties

Broomfield, CO

Multi-family

Beneficial Interests $91,372,086
Loan Proceeds $94,708,913
Offering Price $186,080,998
Loan-to-Offering Price Ratio: 50.90%
Minimum Purchase (1031): $100,000
Minimum Purchase (cash): $25,000
Current Cash Flow: 5.00%

Jacksonville, FL

Multi-family

Beneficial Interests $63,026,537
Loan Proceeds $73,980,000
Offering Price $137,008,537
Loan-to-Offering Price Ratio: 54.00%
Minimum Purchase (1031): $100,000
Minimum Purchase (cash): $25,000
Current Cash Flow: 5.00%

Colorado Springs, CO

Multi-family

Beneficial Interests $28,974,578
Loan Proceeds $36,000,000
Offering Price $64,974,578
Loan-to-Offering Price Ratio: 55.41%
Minimum Purchase (1031): $100,000
Minimum Purchase (cash): $25,000
Current Cash Flow:4.75%

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We’ve heard nightmare stories over the years concerning the management headaches that come with rental properties: properties that have depreciated in value, and that would have huge tax consequences if sold, with the IRS taking a big chunk.

However, these hassles have solutions. One solution is to transfer the money via a 1031 Exchange into a portion of larger properties, avoiding capital gains, thereby, still having rental income from properties that don’t require active management.

Michael Malone,
FRG Vice President

Is a Tax-Deferred Exchange right for you? Sure, a 1031 Exchange provides an effective strategy for deferring the capital gains tax that may arise from your investment property sale. But, beyond Capital Gains deferment, there are other reasons to participate.

A 1031 Exchange can relieve the burden of active real estate ownership and can allow the diversification of real estate portfolios by geography and property type, giving access to multimillion dollar properties.

Ben DiSalle,
FRG Vice President

What is a 1031 Exchange

For investors, a 1031 Exchange may provide an effective tax strategy for tax deferral as part of succession and estate planning. Internal Revenue Code Section 1031 provides that “No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment”

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Do you have questions? If it’s time to restructure and simplify your real estate portfolio, we can help you take the next step.

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DISCLAIMER

The information contained herein is neither an offer to sell nor a solicitation of an offer to buy securities. Do not construe the contents and discussion herein as legal, tax or accounting advice. The information contained herein is believed to be accurate, however, no such warranties, representations, or guarantees are provided to that effect, either expressly or implicitly, further, the information contained herein is intended only to provide a high level overview and not an exhaustive explanation of the rules, regulations, exceptions, etc. generally applicable to a like-kind exchange pursuant to Internal Revenue Code Section 1031. The discussions and examples contained herein are based on law presently in effect and certain proposed Treasury Regulations. Nonetheless, readers should be aware that new administrative, legislative or judicial action could significantly change the information contained herein. Transactions involving Internal Revenue Code Section 1031 are highly complex, and it is strongly recommended that investors seek competent, independent tax and legal counsel prior to initiating, and while performing, such a tax deferred exchange.