Build Wealth Faster with This Tax “Loophole” (1031 Exchange) (Rookie Reply)

Real Estate Rookie

BiggerPockets

How To, Education, Business, Investing, Entrepreneurship

4.8 • 1.7K Ratings

🗓️ 13 December 2024

⏱️ 31 minutes

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Summary

Are you looking to grow your real estate portfolio and build wealth faster? There’s a tax “loophole” that allows you to sell your property and roll your equity (and profits) into a bigger and better rental property—all while deferring thousands of dollars in taxes. Stay tuned to learn how to use a 1031 exchange to your advantage! Welcome back to another Rookie Reply! Today, Ashley and Tony are answering some of your recent questions from the BiggerPockets Forums. After discussing 1031 exchanges and “like-kind” properties, we’ll help an investor determine if they should sell or rent a property that, despite the potential to bring in decent monthly cash flow, has some costly capital expenditures looming. Next, is it better to stabilize a rental property by making home improvements that help you raise rent or use the same funds to buy another property? We’ll dive into the numbers and show you which option gives you the highest return! Looking to invest? Need answers? Ask your question here! In This Episode We Cover: The tax “loophole” that allows you to defer thousands of dollars in capital gains tax Building wealth and growing your portfolio with a 1031 exchange Whether you should rent or sell a property that needs major repairs When to stabilize your current portfolio versus buying another property Prioritizing renovations that increase home value and allow you to raise rents And So Much More! Links from the Show Ashley's BiggerPockets Profile Tony's BiggerPokckets Profile Join BiggerPockets for FREE Real Estate Rookie Facebook Group Real Estate Rookie YouTube Ask Your Question on the BiggerPockets Forums Put Your Vacation Rental on Autopilot with Hospitable Ask Your Question for a Future Rookie Reply Buy “The Book on Tax Strategies for the Savvy Real Estate Investor” Find Investor-Friendly Lenders What Is a 1031 Exchange in Real Estate? How to Guide & Examples (00:00) Intro (00:46) 1031 Exchanges (11:50) Should I Rent or Sell? (18:43) Making Home Improvements (23:59) Ask Your Question! Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/rookie-496 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [email protected]. Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	Let's get your questions answered.
0:07.6	I'm Ashley Care and I'm here with Tony J. Robinson.
0:11.6	And welcome to the Ricky podcast where every week, three times a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey.
0:19.5	And today we're jumping back into the Bigger Pockets Forum to get all of your investing journey. And today, we're jumping back
0:21.0	into the bigger pockets forms to get all of your questions answered. Now, Rikki's, the forum is the
0:26.0	absolute best place for you to go to quickly get all of your real estate investing questions answered
0:30.4	by experts like me, Ashley, and so many more. All right, so today we're going to discuss 1031 exchanges
0:35.3	and how to property utilize them if you should sell
0:38.5	or rent your property.
0:39.8	And finally, how to decide if you should focus on rehabbing or growing your portfolio.
0:44.5	So let's get into today's show.
0:46.3	Okay, let's start with our first question.
0:48.3	It starts off with, my mother lives in her primary residence in Florida and owns a second
0:53.4	property there. She would like to sell
0:55.7	that second property and is looking for ways to avoid paying capital gains tax on the sale. While
1:02.5	researching, I discovered the 1031 exchange, which seems to offer a way to sell that property and
1:09.0	avoid capital gains tax as long as she immediately, within 180
1:13.8	days, purchases an additional like-kind investment property.
1:18.6	I live in upstate New York, and if this process works, she is considering purchasing that
1:23.8	like-kind property near me and possibly end up renting the property to me. I have a primary question about the like-kind property near me and possibly end up renting the property to me.
1:29.0	I have a primary question about the like-kind definition specifically. It would be
1:34.0	interested in any additional feedback anyone has about this potential plan. First, what are the
	...

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