Real Estate Planning and Strategy

Quickly see the power of long-term investing using this simulator. Choose some goals, and decide how much you’re going to invest, and this simulation will give you an idea of approximately how long it will take to get you there. This is a great place to start if you’re just poking around.

One of the most important steps in accomplishing any goal in life is the definition of the goal itself. A real estate investment plan is no exception so we make them free of charge for all of our clients. Whether you want to retire early, save for your kid’s college, or are just looking to add some passive income, we can help you plan for it. Here is an example real estate plan that we can help you develop for your own goals. Once you’re ready we will help you tailor one to your specific goals and needs.

Get in touch with one of our experts to make a full plan.

We offer tax planning strategies and advice. Contact us for more information.

• The 1031 Tax Deferred Exchange
• 3 Basic Options of a 1031 Tax Deferred Delayed Exchange

Owners of investment property struggle with the dilemma of how to take advantage of the built-up equity in their properties and increase their return on equity. An exchange may be the key to unlocking built-up equity and providing the opportunity to expand a portfolio and create greater wealth. A 1031 exchange is a transaction in which an investor exchanges (sells) investment property (to purchase better) investment property (commercial or residential property) and defers the payment of capital gain taxes, health care taxes, state taxes, as well as the recapture of depreciation taxes – all of which needs to be paid if you don’t do a 1031 exchange, that sale would create a taxable event. Deviating from the process outlined in a 1031 exchange may result in tax consequences or costly penalties.

Why Do an Exchange?

Selling and purchasing better replacement property can lead to:

1. Greater Cash Flow (greater rent)
2. Diversification (not putting all your equity in one property) and greater appreciation (appreciating in more than just one property)
3. Upgrading or repositioning real estate holdings can create additional depreciation to help create additional tax write-offs to help you save more money on income taxes.

If you plan to use a 1031 exchange, understand that there are some pretty strict rules that MUST be followed. If you don’t, you won’t get the tax-deferred exchange. It’s as simple as that. So here are 5 to keep in mind:

1. Properties Must Be “Like-Kind”
2. The Replacement Property Should Be of Equal or Greater Value
3. The 45-Day Identification Window
4. The 180-Day Closing Window
5. You may not touch the money of the relinquished property

The beauty of the 1031 exchange is the ability to repeat this process over and over again on properties and continue deferring taxes indefinitely. 1031 exchanges can be phenomenal wealth-builders by allowing you to transfer the property proceeds tax-free into a larger piece of real estate. This can help you build generational wealth.

If you are considering a 1031 exchange in the future, please speak with a qualified tax professional about your options. The IRS defines like-kind property as all real property held for investment purposes, or the productive use in a trade or business.

The DELAYED Tax Deferred Exchange:

• The Exchange must be opened between an accommodator and your escrow company before the closing of any escrow.  This allows the accommodator to assign themselves into the escrow as the qualified intermediary, pursuant to the IRS’ requirement.
• You must identify the replacement property (property to be purchased) within 45 days after the close of the relinquished (sale) escrow.  The accommodator will provide an identification form with a copy of the exchange agreement.
  [Under the 3 property rule, the IRS allows you to identify up to a maximum of 3 replacement properties, or, under the 200% rule they may identify 4 or more properties. Under the 200% Rule – an investor may choose to identify more than three (3) replacement properties.  If so, the aggregate fair market value (FMV) of all the replacement properties identified cannot exceed 200% of the relinquished property value (or sales price).]
• You must close escrow on any or all of the replacement properties within 180 days from the close of the relinquished (sale) escrow.
• The investor must reinvest all net proceeds into the replacement property.  Should one choose to keep or use any proceeds, those monies could be taxable.
• If applicable, the investor must also obtain a mortgage loan (debt) of equal or greater than the amount paid off on the relinquished property.

The REVERSE 1031 Tax Deferred Exchange:

• Allows for the purchase of the replacement property to close escrow before the relinquished (sale) property escrow closes.
• The relinquished (sale) property must be identified within 45 days, and the sale must close escrow no later than 180 days from the time title changes on either the sale or purchase property involved in the reverse 1031 tax deferred exchange.
• The most important thing to consider with a reverse exchange is that the IRS does not allow the exchanger to hold title to both the replacement property and the relinquished (sale) property at the same time.  The IRS requires a 3rd party to hold title to one of the properties involved in the reverse exchange.  If there is a lender involved in the purchase of the replacement property, the Exchange Accommodation Titleholder will usually take title to the relinquished property to avoid any complications with the new loan.  If no loan is needed to purchase the replacement property, then the Exchange Accommodation Titleholder will take the title to the replacement property.
• Just like a regular exchange, the accommodator will need to assign itself to both the Purchase and Sales Agreement. They will need to get a copy of the purchase and sale agreements, any escrow instructions, and the preliminary title report to prepare the exchange agreements and assignment.

The Hybrid 1031 Tax Deferred Exchange:

• Allows you to combine all the sale(s) you can within a Delayed Exchange BEFORE closing your purchase.  The accommodator will concurrently set up your purchase into both a replacement property for your Delayed exchange AND set up the remaining balance of your purchase into a REVERSE exchange for the SALE of what you still need to sell.  From that point, you will have 180 days to sell and close whatever you need to fulfill your exchange.
• Should you choose to purchase yet another property into the exchange because you have further funds left over, you may be following the Delayed Exchange rules as seen above.

Exchange laws require explicit adherence to the rules and regulations which have been promulgated by the IRS and the various state taxing agencies throughout the country.  We cannot give tax advice or legal advice and always recommend that a client talks with their CPA or tax attorney about their exchange.

Time value of money is perhaps the most fundamental concept in finance and investing.  Use this simple financial calculator to help with planning, goal setting, loan, and return calculations.  With some basic understanding of how compound interest works, you can see just how powerful a tool this can be to chart your future.

This calculator is divided into separate tabs for each variable that you’d commonly solve for on a financial calculator or spreadsheet program.  Select from FV (Future Value), PV (Present Value), r (rate of return or interest rate), N (time periods), or PMT (payment) to solve for each variable.