One of the beautiful things about investing in real estate is its tax benefits. And the 1031 exchange is a common strategy we use to avoid paying capital gains.
But most of us haven’t studied IRC Section 1031 enough to know ALL the ways we can use the tax code to reinvest our real estate profits—rather than handing them over to Uncle Sam.
Dave Foster is the 1031 exchange expert, qualified intermediary and tax strategist behind The 1031 Investor, a platform that helps investors build and preserve real estate wealth.
Dave has supported thousands of investors in achieving financial freedom by maximizing their reinvestment opportunities.
On this episode of Financial Freedom with Real Estate Investing, Dave joins Garrett to discuss the rules for doing a 1031 exchange in a syndication and describe what to look for in a qualified intermediary or QI.
Dave shares his top strategies for buying time in a like-kind exchange and walks us through the tax benefits of converting an investment property into your primary residence.
Listen in to understand the common mistakes investors make in a 1031 exchange and learn how to make the most of the tax code and accelerate your path to financial freedom with real estate!
How a 1031 exchange works to help real estate investors
- Roll profits from sale into purchase of next property
- Don’t have to pay taxes on capital gains
How Dave learned about the 1031 exchange
- Working toward financial freedom for family
- Burned by taxes on sale of first investment property
The rules for doing a 1031 exchange with a syndication
- Buy property of equal or greater value
- Debt must be same or more
How to diversify a syndication via 1031 exchange
- Sell large multifamily, buy 2 smaller properties
- Grow bigger but stay in wheelhouse demographic
Dave’s strategies for buying time in a 1031 exchange
- Lock up replacement property with letter of intent
- Lease replacement property with option to buy
- Extended closing contingent on sale of old property
- Use placeholder address (if day 180 is next year)
What to look for in a good, qualified intermediary or QI
- Experience and understanding of unique situation
- Responsive and good problem-solver
How mom-and-pop investors can get into 1031 syndications
- Separate real estate investments from all others
- Reach $1M in equity with active and passive combo
How to use the Section 121 exclusion of a 1031 exchange
- Move into 1031 investment property after 2 years
- Prorate tax-free amount between # of years
The top 2 mistakes investors make in a 1031 exchange
- Don’t know where or what you want to invest in
- Panic and take anything
Connect with Dave Foster
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What Happens When I Exit A Deal
The Tax Benefits of Owning a Multifamily Home
Real Estate Syndication and the Benefits for the W-2 Employee
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Financial Freedom with Real Estate Investing by Michael Blank