The ideas and concepts set forth in this article have resulted in many ordinary people placing themselves in an extraordinary financial position.
As a vehicle for creating wealth, everyone agrees it's hard to beat real estate.
Of the four benefits all investors seek (income, tax advantages, appreciation and leverage); there is no other investment that offers as much as real property.
However, upon the sale of the real estate, investors face the assessment of the capital gains tax which can severely reduce their equity.
Current taxation of capital gain is at 15% on any appreciation, 25% on any depreciation taken on the property, plus any state taxes (N/A for TN).
Ouch! Uncle Sam just took a bite out of your client's wallet! A 1031 Tax Deferred Exchange, also known as a Starker Exchange is one of the few remaining tax advantages available to your investor clients.
A 1031 Exchange is not a tax loophole.
It is a section of the Internal Revenue Code, written by Congress.
The code allows anyone who meets certain requirements to sell their property and defer paying taxes on the gain.
Simply put, a 1031 Exchange allows an investment property owner to sell the real estate and at the same time deferring the capital gain by reinvesting 100% of their equity within certain time frames into another investment property (ies) of equal or greater value.
The IRS has provided us with strict rules and guidelines we must follow.
The taxpayer is provided an area of protection also known as a "safe harbor".
This is possible through the use of a disinterested party referred to as a Qualified Intermediary.
In effect, the Qualified Intermediary shelters the client from a taxable event.
The 1031 Exchange is the most powerful wealth building tool in real estate.
Becoming familiar with the benefits of exchanging can boost commissions and help guarantee long lasting client relationships.
Prepare yourselves to hear from California Investors now more than ever, as CNN money has forecasted a continuing cold front for the west coast real estate market.
California is home to one of the coldest markets for 2007.
Tennessee on the other hand is predicted to be warm and sunny with a strong and healthy outlook.
In fact, Tennessee boasts to be number 12 of the 20 hottest markets.
It is a fact that real estate investors are a driving force here in the residential real estate market.
The true power of exchanging is the ability to meet investment objectives without losing equity to taxation.
Exchanging allows investors to purchase real estate with pretax dollars.
In effect, you are using the government's money to purchase more real estate.
Did you know it was so easy to get a loan from Uncle Sam? You have a rich uncle after all! Let's look at an example: Your client is selling investment property for $200k.
He has a tax bill of $70k.
He writes a check to the IRS and has $130k left over to reinvest in a new property.
Using that cash as a 20% down payment, he is able to purchase a $650k property.
On the other hand, you inform your client of the tax benefits of a 1031 Exchange.
By doing the exchange, he has the full $200k to use as a down payment.
All of a sudden, you and your client are shopping for a million dollar property! Your client has $350k more buying power and your commission check is increased by that same amount.
And remember: when dealing with an exchange client, your job is not done once the old property sells.
The requirements of an exchange are that the investor both sell and buy real estate.
Hence, earning you multiple commissions from one client! Don't limit yourself to "serial" investors or "deep pocket" clients.
Small investors and single property owners are excellent prospects for exchanging, especially in an area such as middle Tennessee where property values have sky rocketed.
Remember; if they don't live there, its investment property and will be taxed as such.
Educating yourself on the basics of exchanging is crucial to developing a niche in the investor market.
Investors wish to work with informed agents.
While the concept of the 1031 exchange is a lucrative marketing tool, I stress the importance of having a Qualified Intermediary and/or the clients CPA handle the details of any specific situation.
*i.
e.
never figure out someone else's tax bill.
As you have concluded, the 1031 Exchange is a major wealth building tool and the fuel that feeds the fire of significant sales activity for the savvy real estate agent.
Opportunities include multiple commissions from one client, larger commissions, increased sales, and client loyalty.
As a vehicle for creating wealth, everyone agrees it's hard to beat real estate.
Of the four benefits all investors seek (income, tax advantages, appreciation and leverage); there is no other investment that offers as much as real property.
However, upon the sale of the real estate, investors face the assessment of the capital gains tax which can severely reduce their equity.
Current taxation of capital gain is at 15% on any appreciation, 25% on any depreciation taken on the property, plus any state taxes (N/A for TN).
Ouch! Uncle Sam just took a bite out of your client's wallet! A 1031 Tax Deferred Exchange, also known as a Starker Exchange is one of the few remaining tax advantages available to your investor clients.
A 1031 Exchange is not a tax loophole.
It is a section of the Internal Revenue Code, written by Congress.
The code allows anyone who meets certain requirements to sell their property and defer paying taxes on the gain.
Simply put, a 1031 Exchange allows an investment property owner to sell the real estate and at the same time deferring the capital gain by reinvesting 100% of their equity within certain time frames into another investment property (ies) of equal or greater value.
The IRS has provided us with strict rules and guidelines we must follow.
The taxpayer is provided an area of protection also known as a "safe harbor".
This is possible through the use of a disinterested party referred to as a Qualified Intermediary.
In effect, the Qualified Intermediary shelters the client from a taxable event.
The 1031 Exchange is the most powerful wealth building tool in real estate.
Becoming familiar with the benefits of exchanging can boost commissions and help guarantee long lasting client relationships.
Prepare yourselves to hear from California Investors now more than ever, as CNN money has forecasted a continuing cold front for the west coast real estate market.
California is home to one of the coldest markets for 2007.
Tennessee on the other hand is predicted to be warm and sunny with a strong and healthy outlook.
In fact, Tennessee boasts to be number 12 of the 20 hottest markets.
It is a fact that real estate investors are a driving force here in the residential real estate market.
The true power of exchanging is the ability to meet investment objectives without losing equity to taxation.
Exchanging allows investors to purchase real estate with pretax dollars.
In effect, you are using the government's money to purchase more real estate.
Did you know it was so easy to get a loan from Uncle Sam? You have a rich uncle after all! Let's look at an example: Your client is selling investment property for $200k.
He has a tax bill of $70k.
He writes a check to the IRS and has $130k left over to reinvest in a new property.
Using that cash as a 20% down payment, he is able to purchase a $650k property.
On the other hand, you inform your client of the tax benefits of a 1031 Exchange.
By doing the exchange, he has the full $200k to use as a down payment.
All of a sudden, you and your client are shopping for a million dollar property! Your client has $350k more buying power and your commission check is increased by that same amount.
And remember: when dealing with an exchange client, your job is not done once the old property sells.
The requirements of an exchange are that the investor both sell and buy real estate.
Hence, earning you multiple commissions from one client! Don't limit yourself to "serial" investors or "deep pocket" clients.
Small investors and single property owners are excellent prospects for exchanging, especially in an area such as middle Tennessee where property values have sky rocketed.
Remember; if they don't live there, its investment property and will be taxed as such.
Educating yourself on the basics of exchanging is crucial to developing a niche in the investor market.
Investors wish to work with informed agents.
While the concept of the 1031 exchange is a lucrative marketing tool, I stress the importance of having a Qualified Intermediary and/or the clients CPA handle the details of any specific situation.
*i.
e.
never figure out someone else's tax bill.
As you have concluded, the 1031 Exchange is a major wealth building tool and the fuel that feeds the fire of significant sales activity for the savvy real estate agent.
Opportunities include multiple commissions from one client, larger commissions, increased sales, and client loyalty.