Are you tired of tenants, bathrooms and garbage?
Wouldn’t you rather go to Tahiti? Are you a homeowner with a rental property whose value has appreciated significantly? Are you ready to cash in those winnings and take that trip to Tahiti?
Before selling your property, check with your accountant
will tell you that you will pay $60,000 in principal
Income Tax to Uncle Sam. His accountant will also tell you
that adding another $20,000 to your income from that sale is
called recovered depreciation. This will bump you into
next tax bracket and they will sentence you on April 15 to send
to the IRS a check for perhaps another $7,000.
Are you still ready to sell that property?
Looks like that trip to Tahiti is going to be sometime in
the distant future…
But wait! You decide to check with your real estate agent and then
Learn about a 1031 exchange to defer your capital gains.
Your real estate agent tells you if you buy another similar rental
property of equal or greater value, will not be hit with
income tax on the sale. That’s all very well, but
doesn’t really get you out of the headaches associated
collect rent, keep your unit occupied, find
clean/classy tenants who won’t trash the place, nor
prevent him from getting that call at 2 am to fix an overflow
toilet. To top it off, now you have to pay more in
property taxes and must charge a higher rent.
Hmm… maybe this idea isn’t the ticket to that South Pacific
paradise neither.
This is the dilemma I heard again from my financial clients
and again. They were frustrated and felt trapped in their
Current situation. So what is a failed income property?
owner what to do? After much research and roadblocks, I found
the perfect solution that has changed the lives of my
customers and took away the stress to enjoy life.
For anyone who is tired of owning and who owns a
rental/commercial property that has gone up a lot in value,
take heart.
A change from 1031 to a Tenant in common property may be your
answer.
There are very specific rules to follow set by the IRS, and
the entire detailed process is the subject of a future
article, but here’s the gist:
1-Sell your current income
property;
2-Before the closing of the guarantee deposit, declare through a Qualified
Middleman (also called an Usher, which is a
qualified third party) who intends to make a 1031 exchange
in a Tenant in Common Property;
3-Work with an accredited
company to identify a property you would like
buy a share in;
4-At the closing of the guarantee deposit, your
income is transferred by the Usher to buy
your proportionate share of a larger “A” rated commercial
building;
5-You can choose a business center, a medical center
office building or similar luxury property; and finally,
6-You get a dead interest in this property, so you can
keep it, resell it, pass it on to your heirs, or even give it away
to charity at your death.
The way this works is all new fractional owners, or
“Tenants in common” hire a great management company to handle
all property management tasks. The company finds and
maintains high-quality tenants, does maintenance and
update, pay property taxes and drive all day
to day of crises that arise. Probably the three most important.
The factors in this whole process are:
1-Your choice of company
who offers the properties for sale;
2-the Usher,
Y;
3-the management company.
Make sure each of the three parts is top notch with
trace logs Anything less could spell disaster.
When this 1031 option is successful, your benefits
be:
Deferral of all capital gains,
A monthly contractual income (usually based on a 6-7% return
on fairness),
Depreciation of buildings for tax savings,
Unlimited potential for property appreciation, and
No more property management headaches.
Goodbye tenants, garbage and toilets!
Hello Tahiti!
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