1. Must own the property for _more than_ 1 year 2. If you buy more than 3 other properties, you can't buy something more than 2x the original property value. If you buy 3 or less, there is no limit. 3. You have 45 days to identify the new properties, and 180 _calendar_ days to complete the new purchase 4. Find a qualified intermediary 5. How you hold title on your old property is how you must hold title on your new property 6. All the cash of the sale of the original property must be used to purchase the new property / properties. You can't take money out of the exchange.
*RedDepo* -- Do you mean the entity to whom you are selling your original property? If so, nothing. This is about how you process your profits from a sale, it has nothing to do with the buyer to whom you are selling your property.
Dienekes I meant the buyer, yes. Saw a listing that was subject to a 1031 in the seller disclosure which talked about tax estimates; wasn’t sure if the buyer was taking on a debt.
*RedDepo* -- Perhaps he was talking about property taxes? The buyer would have nothing to do with the taxes owed by the seller, no matter what the situation.
I love the 1031 loop hole. Quick questions: Why did you pay capital gains on your primary residence in CA? Did you live in it long enough to take advantage of the federal capital gains exemption of up to $250k (single) $500k (married) for your primary residence? Did you still have to pay the 9.3% for capital gains in CA on the sale of your primary residence?
Another gotcha was that if you need some cash to improve your new properties, you MUST pull it out before it goes to your intermediary. This means you must tell the escrow company handling the initial sale to pull it before sending it to the intermediary, otherwise you will be cash poor. If you don't spend the all the money in the intermediary account and take the tax hit, you still can't touch it for 180 days. You can get it all on day 46 -minus tax- if you fail to identify any properties in the 45 day period. Things nobody tells you.
I love how you guys each have your own offices to capitalize on the highest possible deductions... smart thinking... not sure if that is the purpose behind it but that was my first thought when I saw that you were in different rooms.
If you live in the house for 2 years within the last 5 years ending on the closing date of sale, then it is considered your primary residence at least partially. You have to consider the exclusion on gain for primary residence first, and then put the rest of the gain under 1031. See the publication for "selling your home" for more details. For full treatment under 1031, you have to live in the home less than 2/last 5 yrs. So, i'd say 3 years and one day as a rental to avoid alot of headache with the numbers. (Not legal advice)
As far as "rule #1", if you live in a property for a time and then sell it, it's my understanding that you don't pay taxes on the gains at all, so why would you want to convert it to a rental in order to do a 1031, which is only tax deferment? Aren't you _creating_ a tax burden for yourself by doing that? I think the rule is something like if you've lived in the property for 3 of the last 5 years or something to that effect.
I found out that the rule is that you need to live in the property for 2 of the last 5 years and then you get $250k cap gains exclusion of you are single, or $500k if you are married.
On the first example there, when you gave example of selling $500K and buying $1M home, how does the kid own 50% of that $1M? Do you put them in the buying agreement? Thanks
No year and a day tax code mandate. It should be longer than a year and the longer the better, it's very grey. If you sell to a related party then it's going to be at least 2 years. Please please please speak to a tax professional before doing anything! Very critical.
How Does closing costs factor in? example to try and simplify. If I buy a house for 70 K and sell for 170 K. I profit 100K. So I have to go find another house for 170K but I will have to pay closing costs. So should I find one for 160 K and leave 10 k for closing costs? insight is appreciated
Great episode. Quick question. Let’s say you buy a property for 50,000 and end up selling it for $100,000. And with that hundred thousand dollars you want to buy two properties for $35,000 each and put $20,000 into each of them to renovate. Is that a legitimate way to do a 1031 exchange, or does the actual purchase price of the two properties have to be $100,000 or more? Does that make sense?
If my LLC has a Construction loan $40k, AND I had also used my business CCs to buy supplies and obtained private personal loans, holding costs, and Contractors etc another $45k, and I want to do a 1031 exchange...IF I sell for $120k, it looks like a $80k profit on HUD and I would need to have the entire $80k held in escrow and would not have any money I need to pay off contractors and privatel loans, and CC expenses incurred in the renovation of the property. I actually only profited $25k. How do I make sure the other costs are taken out of the profit on the HUD at the closing?
If you inherit a property and sell you will not have to pay gains on the profits, they do a stepped up value on the transfer that begins on the date the person passed away. So the basis for gains gets reset, which is another great way to transfer wealth to your family since they will not have to do anything to capitalize on the gains.
Ok. The property was placed in a quit claim deed to me a year and a half before passing. I'd like to reinvest that sale into a larger place with a rental and a part year residence for myself. Which is the best advisable route?
So if you still have some money left over from the sale of the original house. You can use that remainder to renovate the new houses you just bought and still be within the 1031 rules?.
So if i have a home that is selling for 280k with an equity of 100k to purchase 2 rental properties ? Property 1 purchase price 200,000 downpayment 40,000 , property 2 cost 250,000 downpayment of and 50,000
If you own an investment property 50/50 w/ a sibling partner, can you sell and use a 1031 exchange to transfer only your proceeds (50%) into another property?
I just bought land, can I sell my rental property and apply the equity to that land? Land will be future retirement home? Build house and use as rental a few years.
So how would I go about using a 1031 on selling new homes? Would I have to build my first home rent it out for a year, 1031 exchange it for land? And I could still use that remaining money from the land to pay the gc to keep building homes for me and keep it going? Im interested in building new homes as im into construction and have amazing contacts for everything but I would like to know the best way to go about it for the least amount of tax possible.
I was told by another investor that if you have a multiplex held in an LLP or S Corp, you can in fact be a tenant and still run the exchange through the legal entity, even though it is your residence, since the owner is the LLC, and it is not the residence of that ‘owner’. Any thoughts?
@7:49. My question is, what if your LLC owns the property and you made yourself the tenant, paying rent to the LLC/owner. Doesnt that classify it as an investment property?
Strip club sounds fun. Actually 12:14 mark is wrong you can retro properties via a reverse 1031 look it up. 23:04 is another mistake "you have to use ALL of the cash" NOT TRUE. If you do not use ALL of the cash you simply pay the taxes on the portion of the exchange not used, totally misleading at 23:04.
Question..I thought if you lived ina property for at least 2 of the preceding 5 years, you could sell and not be taxed on gains? So couldnt you then use that money to buy a rental without that portion being taxed when you later sell the rental?
If you sell a paid off property and use money to pay off another rental you are buying is that considered a 1031 exchange. What is the best tax strategy for this ?
I've got a case. We identified the properties and we were never able to close on them. But the 1031 Exchange company or the qualified intermediary released our funds in 2019. Do we pay the taxes in 2019 or 2018?
This is basic 1031 stuff what I would like to see a Video on is The mechanics of the 1031 exchange dealing with your tax return. How do you deal with the depreciation you claimed on the old property (do you roll it into the new property) when doing the taxes. Also where do you claim the fees you paid to do the 1031 exchange, on the old property or the new property.
KidCity Lynnwood baby steps. Up to double the value per exchange. Also, after doing a 1031 you can't do another on the new property(ies) for at least 5 years. I'm not sure when that time begins so i'd assume the worst and use the closing date on the new properties not the sale date of the old one. Research is key. Or hire a tax pro with experience in 1031's.
Do you have to use the entire amount of the sale of your current property in the exchange? Can you withhold a portion of it? For example, i'm selling my property for $112k. I initially purchased the property for $60k and have paid it off. Can I withhold $60k of it and use only $52k in the exchange? Would I be taxed for the $60k? I'm not talking about waiting the 180 days period but to withhold the $60k up front. Thank you.
The new property (or properties) must be of equal or greater value. Make sure you get in touch with an intermediary. Here's the team we work with: www.ax1031.com/
I have a question. I live in one of my parents home rent free. I am in the process of buying a new home. My parents want to sell the home I am living in and use the money to help me pay for my new home. Will they have to pay capital gains.
Living in "one" of your parent's homes rent free, and they are going to sell said unit, and then buy you a new home? Did I get that right? Can your parents adopt me?......I want to be a pseudo Trust Fund Baby too?
Great stuff! I actually had training on the 1031, and it became of use this past weekend. The fellow who is mowing our lawn on a rental that is FINALLY coming to the end of rehab asked us last weekend if we were interested in selling (he has a nephew that is looking for a house, and it rehabbed into a very nice interior.) I actually told him that I could not sell the house for a year and a day. Your content is really great for people like me who have just embarked on this journey into passive income! Thumbs up.
Can I use the $260k equity in my house that I owe $60k on, and take out a fixed equity line of credit to cash out a $200k property to start a 1031exchange? I also plan to rent my house out to cover all debt
So I can sell my 300k single family and buy 6 -50k single family? If yes what if property number 6 deal falls? I would pay capital gain on that only 50k?
+Steven Israel Hi Steven. The property in a 1031 exchange must be held for business or investment purposes, so if that applies, then it's likely. However, the IRS has very strict rules regarding 1031 exchanges, so we would hate to lead you astray! You can contact a 1031 expert, check out these podcast episodes and scroll to the bottom for contact info: morrisinvest.com/episode53, morrisinvest.com/episode158.
Dear Sir, If I bought a rental house 1 1/2 yrs ago cash for 40K and sold it for 100K........At the sale, could I get my 40K down payment back and just put the 60K profit in a 1031 for my next purchase or do i have put the whole 100K in the 1031 ? Thank you. AC
If you keep your property until death, your real estate will likely "step up" in basis to the current market value upon death (if rules apply). That means your children could sell all of the inherited properties tax free. That's why it can be a mistake for parents to add their children's name to a deed prior to death - it will eliminate the complete "step up". Also, a homeowner who converts their residence to a rental will likely lose the tax free sale of their home. Why not sell the residence tax free, then purchase the rental with the proceeds? These tricks to selling property without paying tax are two of the great "gifts" of the tax code.
Hey @MorrisInvest- Quick Question. Can you 1031 exchange a existing rental property which is in your LLC and buy another rental property where you rent it out to your spouse, but you and your spouse lives in it?
NOTES: The 1031 Exchange is a powerful tool to maximize wealth while minimizing tax burdens. Here are six rules to keep in mind. 1. In a 1031 exchange both properties must be business or investment. You can’t do it with a primary residence. 2. If you sell something, within forty-five days you have to identify the exchange property. 3. You have six months (180 days) to complete the exchange after the sale. This is a firm deadline. 4. You have to work with a company who holds the money in escrow. You will never have access to it. It goes from the sale to the escrow to the purchase. 5. You have to take title on the new property in the exact same way as the old. 6. You have to buy an equal or more valuable property.
We're in the middle of a 1031. We're buying a seasonal property and renting most of the season. Enough to cover the mortgage for the year. But we're also able to use it a few weeks. Can't take more time off anyway so it works out.
Clayton, I had a call with your team yesterday with the intent of looking to 1031 into a few of your properties. We don’t own the current property free and clear so would need to finance the new acquisitions but was told by your guy that you only allow cash purchases. Am I to believe that your services are just not appropriate for our situation?
Hi morris long time listener. Do i need to ask my property mgr for invoice or bill or receipt when it comes to fixing something? Every other month ther is something to fix which leaves me less $$ than rent. How do i fix this? What do you recommend? Im far from place..like 2 hours away and these property mgr have been good.
+computerfastrepair You should receive a monthly statement from your property management team. In terms of avoiding those repairs, that's why I do a comprehensive renovation. Check out this video on minimizing repairs: goo.gl/ew6n5B
Awesome vid!! I am wondering if you sell an Investment Property with a 1031 Exchange and you purchase a multiplex. Let’s say a fourplex. Can you live in one of the units?
Morris Invest I have this scenario: I bought a property for 80K in 1999. Turned it into a IP 2002 and have managed it myself still to the present day. Been doing depreciation each year for taxes also. Let’s say I sell it with the 1031 Exchange program. Then I purchase a 8unit with the proceeds after 60 days. Am I allowed to keep managing the new IP myself once the closing happens?
so you are talking about moving up and up and up in your property values with the 1031 exchange process, but could you potentially sell a property worth 200k which you have a loan on for 100k offering you a gain of 100k and then roll that over into a property that is only worth 100k and have no gains but downsize your debt and still reap the tax benefit of the 1031 exchange? is it the property value that has to be matched by the next property or just the gains?
If u have owned it and lived in there for more then 2 years you don’t need to 1031 exchange it! No capital gains tax on personal residence owned for more then 2 years:) FYI
Great info keep it up.. can you use the 1031 exchange for overseas properties? Secondly just to confirm info.. my mother owns a rental townhome worth approx 800k they purchased for 360k years ago and there is no debt on it. If we sell and 1031 exch it would we have to use the entire 800k to purchase properties or can we just use the profit of 440k? Just trying to make it clear for me thanks.
+baldavengr Hi, thanks for your comment! We are not experts on this topic, and would hate to lead you astray. Luckily, we know a few 1031 geniuses! Check out the contact info at the bottom of these pages: morrisinvest.com/episode53, morrisinvest.com/episode158. Hope that helps!
Not sure, did you contradict your one of your arguments. How can a parent “give” property to their children tax free if the name on the new Title has to be exactly the same as the old?
It is a tax deferral tool. If you were to just sell a property and buy a new one, you would pay capital gains taxes on the sale of the first property. A 1031 bypasses the tax bill.
So you’re only deferring the tax to the next property and you pocket the rest of the profit? Example. 1m in profit that would be 300k in capital gains roughly, So do you take the entire 1m toward the next property? Or only the 300k?
One thing that is not clear in this video (when you said the IRS is not worried about your debt - they are indeed), and is causing me some problems is that you must purchase property of equal value to what you sold, not simply equal to your equity. So if you sold a house for $1 million with a $500k mortgage, you still need to buy $1 million in new property or you will be taxed on the difference. This is very important to plan for if you may have problems getting financing. For example, because I sold a low ROI California property, my tax returns indicate that Debt To Income is too low to qualify for new loans. Conventional lenders don't want to account for the expected new, more better income in their calculations. This will most likely lead to swimming with the sharks (hard money lenders). Beware.
I appreciate the wealth of information that you are giving us free here. I only ask, is it possible for you to start using a dry erase board to actually SHOW how the numbers work out while you are talking? I see most other real estate help channels do this. I think it would help your subscriber base significantly.
Hi Tina, in order to conduct a 1031 exchange, you must work with an intermediary. They can walk you through the process and make sure everything is done in accordance with IRS regulations. We recommend Asset Exchange Co. www.ax1031.com
i thought i understood 1031's, then i watched this and realized i didn't know the half, great video. is there another 1031 video on youtube you would recommend?
Hello! We've got a few podcast episodes on 1031 exchanges: morrisinvest.com/episode53, morrisinvest.com/episode158. Both are interviews with qualified intermediaries, so they know their stuff!
Now that the Whitehouse has released a framework for the proposed tax overhaul, i think you should post a video on your opinion of how those changes could affect the types of investors you work with. You can read it at whitehouse.gov/taxreform. 9 pages. Granted, nothing is set in stone yet.
i would have watched this video but after listening to them ramble for 3 min about random b.S i decided to never watch any of their videos for wasting my time.
The 1031 exchange is a complex topic, it's not possible to make it super simple. We have other videos that are less complex. Plus, this video has performed very well, but thanks for your concern! 😉
1. Must own the property for _more than_ 1 year
2. If you buy more than 3 other properties, you can't buy something more than 2x the original property value. If you buy 3 or less, there is no limit.
3. You have 45 days to identify the new properties, and 180 _calendar_ days to complete the new purchase
4. Find a qualified intermediary
5. How you hold title on your old property is how you must hold title on your new property
6. All the cash of the sale of the original property must be used to purchase the new property / properties. You can't take money out of the exchange.
Thanks for taking notes!
What does this mean for the buyer of property subject to a 1031 exchange?
*RedDepo* -- Do you mean the entity to whom you are selling your original property? If so, nothing. This is about how you process your profits from a sale, it has nothing to do with the buyer to whom you are selling your property.
Dienekes I meant the buyer, yes. Saw a listing that was subject to a 1031 in the seller disclosure which talked about tax estimates; wasn’t sure if the buyer was taking on a debt.
*RedDepo* -- Perhaps he was talking about property taxes? The buyer would have nothing to do with the taxes owed by the seller, no matter what the situation.
4:32 you're welcome.
Yeah. Took so long.
I love the 1031 loop hole. Quick questions: Why did you pay capital gains on your primary residence in CA? Did you live in it long enough to take advantage of the federal capital gains exemption of up to $250k (single) $500k (married) for your primary residence? Did you still have to pay the 9.3% for capital gains in CA on the sale of your primary residence?
Because the exemption is to live there 2 of the most current 5 years.
Another gotcha was that if you need some cash to improve your new properties, you MUST pull it out before it goes to your intermediary. This means you must tell the escrow company handling the initial sale to pull it before sending it to the intermediary, otherwise you will be cash poor. If you don't spend the all the money in the intermediary account and take the tax hit, you still can't touch it for 180 days. You can get it all on day 46 -minus tax- if you fail to identify any properties in the 45 day period.
Things nobody tells you.
Stopped watching at 7:31 because it shouldn't take this long to get to the point.
There are cat videos I should be watching!
Me to
I love how you guys each have your own offices to capitalize on the highest possible deductions... smart thinking... not sure if that is the purpose behind it but that was my first thought when I saw that you were in different rooms.
WORKING...
If you live in the house for 2 years within the last 5 years ending on the closing date of sale, then it is considered your primary residence at least partially. You have to consider the exclusion on gain for primary residence first, and then put the rest of the gain under 1031. See the publication for "selling your home" for more details. For full treatment under 1031, you have to live in the home less than 2/last 5 yrs. So, i'd say 3 years and one day as a rental to avoid alot of headache with the numbers. (Not legal advice)
+Mario Mendieta Thank you for sharing!
As far as "rule #1", if you live in a property for a time and then sell it, it's my understanding that you don't pay taxes on the gains at all, so why would you want to convert it to a rental in order to do a 1031, which is only tax deferment? Aren't you _creating_ a tax burden for yourself by doing that? I think the rule is something like if you've lived in the property for 3 of the last 5 years or something to that effect.
I found out that the rule is that you need to live in the property for 2 of the last 5 years and then you get $250k cap gains exclusion of you are single, or $500k if you are married.
On the first example there, when you gave example of selling $500K and buying $1M home, how does the kid own 50% of that $1M? Do you put them in the buying agreement? Thanks
No year and a day tax code mandate. It should be longer than a year and the longer the better, it's very grey. If you sell to a related party then it's going to be at least 2 years. Please please please speak to a tax professional before doing anything! Very critical.
How Does closing costs factor in? example to try and simplify. If I buy a house for 70 K and sell for 170 K. I profit 100K. So I have to go find another house for 170K but I will have to pay closing costs. So should I find one for 160 K and leave 10 k for closing costs? insight is appreciated
Hi Shannon! We just released two videos on closing costs. bit.ly/2Jt1m6C
Great episode. Quick question. Let’s say you buy a property for 50,000 and end up selling it for $100,000. And with that hundred thousand dollars you want to buy two properties for $35,000 each and put $20,000 into each of them to renovate. Is that a legitimate way to do a 1031 exchange, or does the actual purchase price of the two properties have to be $100,000 or more? Does that make sense?
Hi Andrew, the new property must be of equal or greater value--in terms of equity. Hope that helps!
If my LLC has a Construction loan $40k, AND I had also used my business CCs to buy supplies and obtained private personal loans, holding costs, and Contractors etc another $45k, and I want to do a 1031 exchange...IF I sell for $120k, it looks like a $80k profit on HUD and I would need to have the entire $80k held in escrow and would not have any money I need to pay off contractors and privatel loans, and CC expenses incurred in the renovation of the property. I actually only profited $25k. How do I make sure the other costs are taken out of the profit on the HUD at the closing?
If you inherit a property and sell you will not have to pay gains on the profits, they do a stepped up value on the transfer that begins on the date the person passed away. So the basis for gains gets reset, which is another great way to transfer wealth to your family since they will not have to do anything to capitalize on the gains.
Ok. The property was placed in a quit claim deed to me a year and a half before passing. I'd like to reinvest that sale into a larger place with a rental and a part year residence for myself. Which is the best advisable route?
How do you figure up how much capital gains you will pay if you have been leasing out your home for 6 years but lived in it for 12 years prior.
So if you still have some money left over from the sale of the original house. You can use that remainder to renovate the new houses you just bought and still be within the 1031 rules?.
So if i have a home that is selling for 280k with an equity of 100k to purchase 2 rental properties ? Property 1 purchase price 200,000 downpayment 40,000 , property 2 cost 250,000 downpayment of and 50,000
If you own an investment property 50/50 w/ a sibling partner, can you sell and use a 1031 exchange to transfer only your proceeds (50%) into another property?
I just bought land, can I sell my rental property and apply the equity to that land? Land will be future retirement home? Build house and use as rental a few years.
So you can’t 1031 and get a mortgage? Since it is technically using ALL the money?
Or get multiple property mortgages through the 1031 money?
if i want to invest in property outside of my own state, should i look for legal help within my state, or in the state im looking to buy property in?
+kylen kodama I believe it has more to do with their licensing than their actual location.
Morris Invest thank you for the quick reply. I'll do some digging
So how would I go about using a 1031 on selling new homes? Would I have to build my first home rent it out for a year, 1031 exchange it for land? And I could still use that remaining money from the land to pay the gc to keep building homes for me and keep it going? Im interested in building new homes as im into construction and have amazing contacts for everything but I would like to know the best way to go about it for the least amount of tax possible.
Hi Javier! You should definitely talk to a qualified intermediary to make sure everything is done correctly. We recommend Asset Exchange: ax1031.com
I was told by another investor that if you have a multiplex held in an LLP or S Corp, you can in fact be a tenant and still run the exchange through the legal entity, even though it is your residence, since the owner is the LLC, and it is not the residence of that ‘owner’. Any thoughts?
Hi Julie! It might partially qualify, but that would be a great question for a CPA or a 1031 qualified intermediary.
@7:49. My question is, what if your LLC owns the property and you made yourself the tenant, paying rent to the LLC/owner. Doesnt that classify it as an investment property?
Strip club sounds fun. Actually 12:14 mark is wrong you can retro properties via a reverse 1031 look it up. 23:04 is another mistake "you have to use ALL of the cash" NOT TRUE. If you do not use ALL of the cash you simply pay the taxes on the portion of the exchange not used, totally misleading at 23:04.
Question..I thought if you lived ina property for at least 2 of the preceding 5 years, you could sell and not be taxed on gains? So couldnt you then use that money to buy a rental without that portion being taxed when you later sell the rental?
That portion by definition wouldn’t be taxed, since you are only taxed on the gain over cost basis.
If you sell a paid off property and use money to pay off another rental you are buying is that considered a 1031 exchange. What is the best tax strategy for this ?
Not likely! I believe it has to be a new purchase, but please contact your CPA or a qualified intermediary for advice.
I've got a case. We identified the properties and we were never able to close on them. But the 1031 Exchange company or the qualified intermediary released our funds in 2019. Do we pay the taxes in 2019 or 2018?
Good question for your CPA!
How much do you put down on properties? Debt to equity?
This is basic 1031 stuff what I would like to see a Video on is The mechanics of the 1031 exchange dealing with your tax return. How do you deal with the depreciation you claimed on the old property (do you roll it into the new property) when doing the taxes. Also where do you claim the fees you paid to do the 1031 exchange, on the old property or the new property.
You need both a qualified intermediary and a great CPA. Please don't DIY your taxes if you do a 1031 exchange.
So you can't take a 1 million dollar 1031 exchange and buy 5 500k house's with 200k down each? That exceeds what is allowed by the IRS?
KidCity Lynnwood baby steps. Up to double the value per exchange. Also, after doing a 1031 you can't do another on the new property(ies) for at least 5 years. I'm not sure when that time begins so i'd assume the worst and use the closing date on the new properties not the sale date of the old one. Research is key. Or hire a tax pro with experience in 1031's.
Do you have to use the entire amount of the sale of your current property in the exchange? Can you withhold a portion of it? For example, i'm selling my property for $112k. I initially purchased the property for $60k and have paid it off. Can I withhold $60k of it and use only $52k in the exchange? Would I be taxed for the $60k? I'm not talking about waiting the 180 days period but to withhold the $60k up front. Thank you.
The new property (or properties) must be of equal or greater value. Make sure you get in touch with an intermediary. Here's the team we work with: www.ax1031.com/
I have a question. I live in one of my parents home rent free. I am in the process of buying a new home. My parents want to sell the home I am living in and use the money to help me pay for my new home. Will they have to pay capital gains.
Yes, a 1031 exchange cannot be conducted on a personal residence, plus there are prohibited transactions involving related parties.
Living in "one" of your parent's homes rent free, and they are going to sell said unit, and then buy you a new home? Did I get that right?
Can your parents adopt me?......I want to be a pseudo Trust Fund Baby too?
Great stuff! I actually had training on the 1031, and it became of use this past weekend. The fellow who is mowing our lawn on a rental that is FINALLY coming to the end of rehab asked us last weekend if we were interested in selling (he has a nephew that is looking for a house, and it rehabbed into a very nice interior.) I actually told him that I could not sell the house for a year and a day.
Your content is really great for people like me who have just embarked on this journey into passive income!
Thumbs up.
+Ken Davis Thank you so much! Good luck with the 1031 exchange!
Can you go from Realestate to busines, precious metals or stocks?
Can I use the $260k equity in my house that I owe $60k on, and take out a fixed equity line of credit to cash out a $200k property to start a 1031exchange? I also plan to rent my house out to cover all debt
So I can sell my 300k single family and buy 6 -50k single family? If yes what if property number 6 deal falls? I would pay capital gain on that only 50k?
I habe a foreclosure I bought and fixing it up, we r almost at the year mark, if I wait to sell after the year, do I qualify for 1031 exchange?
+Steven Israel Hi Steven. The property in a 1031 exchange must be held for business or investment purposes, so if that applies, then it's likely. However, the IRS has very strict rules regarding 1031 exchanges, so we would hate to lead you astray! You can contact a 1031 expert, check out these podcast episodes and scroll to the bottom for contact info: morrisinvest.com/episode53, morrisinvest.com/episode158.
Dear Sir, If I bought a rental house 1 1/2 yrs ago cash for 40K and sold it for 100K........At the sale, could I get my 40K down payment back and just put the 60K profit in a 1031 for my next purchase or do i have put the whole 100K in the 1031 ? Thank you. AC
+Anthony Casola The new purchase must be equal or greater value.
Hi Can the new property become a primary residence?
If you keep your property until death, your real estate will likely "step up" in basis to the current market value upon death (if rules apply). That means your children could sell all of the inherited properties tax free. That's why it can be a mistake for parents to add their children's name to a deed prior to death - it will eliminate the complete "step up". Also, a homeowner who converts their residence to a rental will likely lose the tax free sale of their home. Why not sell the residence tax free, then purchase the rental with the proceeds? These tricks to selling property without paying tax are two of the great "gifts" of the tax code.
Hey @MorrisInvest- Quick Question. Can you 1031 exchange a existing rental property which is in your LLC and buy another rental property where you rent it out to your spouse, but you and your spouse lives in it?
We are not CPAs or qualified intermediaries, but my gut reaction is no. In a 1031, your intent must be to invest/do business.
@@RedactedNews Thank you for your response.
You guys are fantastic. Thank you for such great, honest content. Congrats on all your success!!! You’ve earned it!
NOTES:
The 1031 Exchange is a powerful tool to maximize wealth while minimizing tax burdens. Here are six rules to keep in mind.
1. In a 1031 exchange both properties must be business or investment. You can’t do it with a primary residence.
2. If you sell something, within forty-five days you have to identify the exchange property.
3. You have six months (180 days) to complete the exchange after the sale. This is a firm deadline.
4. You have to work with a company who holds the money in escrow. You will never have access to it. It goes from the sale to the escrow to the purchase.
5. You have to take title on the new property in the exact same way as the old.
6. You have to buy an equal or more valuable property.
can you 1031 exchange to an overseas investment property?
You cannot swap US for non-US or vice-versa.
Also can you buy land that you plan on building a rental property on and living on that land as well?
Is it permissible to purchase a rental property under 1031 exchange and use it for vacation 4 months out of the year?
We're in the middle of a 1031. We're buying a seasonal property and renting most of the season. Enough to cover the mortgage for the year. But we're also able to use it a few weeks. Can't take more time off anyway so it works out.
Clayton, I had a call with your team yesterday with the intent of looking to 1031 into a few of your properties. We don’t own the current property free and clear so would need to finance the new acquisitions but was told by your guy that you only allow cash purchases. Am I to believe that your services are just not appropriate for our situation?
What is the rule for 2-Family house wher one unit is rented and other is primary residence?
It may partially qualify, but that is a question for your CPA and/or 1031 qualified intermediary.
I can’t find the 1031 exchange company that you recommend?
Can I take inherited property that I didn't live in and purchase a two family in florida and use one apt as a rental and the other as a vacation home?
what if 1031 exchange is dealing with cash only from my buyer
I have owned a second home for five years. Would I be able to qualify it for a 1031?
Typically the property must be used for business/investment purposes.
Morris Invest So investment proposes only means renting it out?
I love it when "Non Tax People" talk about the tax benefits of something!
LOL!
Hi morris long time listener. Do i need to ask my property mgr for invoice or bill or receipt when it comes to fixing something? Every other month ther is something to fix which leaves me less $$ than rent. How do i fix this? What do you recommend? Im far from place..like 2 hours away and these property mgr have been good.
+computerfastrepair You should receive a monthly statement from your property management team. In terms of avoiding those repairs, that's why I do a comprehensive renovation. Check out this video on minimizing repairs: goo.gl/ew6n5B
Awesome vid!! I am wondering if you sell an Investment Property with a 1031 Exchange and you purchase a multiplex. Let’s say a fourplex. Can you live in one of the units?
No, all properties involved in the transaction must be used for business/investment purposes.
Morris Invest I have this scenario: I bought a property for 80K in 1999. Turned it into a IP 2002 and have managed it myself still to the present day. Been doing depreciation each year for taxes also. Let’s say I sell it with the 1031 Exchange program. Then I purchase a 8unit with the proceeds after 60 days. Am I allowed to keep managing the new IP myself once the closing happens?
The IRS is not going to care who manages it regardless.
so you are talking about moving up and up and up in your property values with the 1031 exchange process, but could you potentially sell a property worth 200k which you have a loan on for 100k offering you a gain of 100k and then roll that over into a property that is only worth 100k and have no gains but downsize your debt and still reap the tax benefit of the 1031 exchange? is it the property value that has to be matched by the next property or just the gains?
+scott banta The property value must be equal or greater.
equal, or up to twice? the sale price? twice the appraised value, tax assessed value?
For tax purposes the IRS only cares about the price you pay, not tax assessment or appraisals.
Ooh, Wow! I am about to rent my primary for a year...and one day! Thanks for the info!
If u have owned it and lived in there for more then 2 years you don’t need to 1031 exchange it! No capital gains tax on personal residence owned for more then 2 years:) FYI
@@stevenanderson3386is to live there 2 out of the most current 5 years.
Great info keep it up.. can you use the 1031 exchange for overseas properties? Secondly just to confirm info.. my mother owns a rental townhome worth approx 800k they purchased for 360k years ago and there is no debt on it. If we sell and 1031 exch it would we have to use the entire 800k to purchase properties or can we just use the profit of 440k? Just trying to make it clear for me thanks.
+baldavengr Hi, thanks for your comment! We are not experts on this topic, and would hate to lead you astray. Luckily, we know a few 1031 geniuses! Check out the contact info at the bottom of these pages: morrisinvest.com/episode53, morrisinvest.com/episode158. Hope that helps!
1031 in NC is about 1,000
These 6 rules apply to Nevada also?
1031 is written in the US tax code-so yes.
Not sure, did you contradict your one of your arguments. How can a parent “give” property to their children tax free if the name on the new Title has to be exactly the same as the old?
So how do people make money on this. I’m confused.
It is a tax deferral tool. If you were to just sell a property and buy a new one, you would pay capital gains taxes on the sale of the first property. A 1031 bypasses the tax bill.
So you’re only deferring the tax to the next property and you pocket the rest of the profit? Example.
1m in profit that would be 300k in capital gains roughly,
So do you take the entire 1m toward the next property? Or only the 300k?
@@asandixon6747 the purchase price of the next property needs to be more than 1m . They don't care how much profit you made.
The info is great and very much appreciated but so much time until the actual info...
One thing that is not clear in this video (when you said the IRS is not worried about your debt - they are indeed), and is causing me some problems is that you must purchase property of equal value to what you sold, not simply equal to your equity. So if you sold a house for $1 million with a $500k mortgage, you still need to buy $1 million in new property or you will be taxed on the difference. This is very important to plan for if you may have problems getting financing. For example, because I sold a low ROI California property, my tax returns indicate that Debt To Income is too low to qualify for new loans. Conventional lenders don't want to account for the expected new, more better income in their calculations. This will most likely lead to swimming with the sharks (hard money lenders). Beware.
Planning on doing a 1031 later this year, thanks for the info!
+KidCity Lynnwood Awesome! Glad this helped.
buying RV is quality as 1031 exchange?
That's a great question! Please ask your qualified intermediary for advice.
Can you make a video on various recomended resources? Where and how to obtain knowledge for simpletons like me.
+garrett coressel Hi Garrett, check out this blog post on must-read books for real estate investors! goo.gl/XEeB3o
Does the UK have such a tax vehicle
Not sure, ask your CPA!
I'm I to late to claim a 1031 after selling the property? Its been 2 days.
Have you received the funds yet? Call our friends at Asset Exchange Company and see if they can help. www.ax1031.com/
@@RedactedNews just today
Thank you folks. You guys awesome 👌. Million likes.
Good advice. Thx - but please let her finish what she's saying. She clearly knows her stuff.
I appreciate the wealth of information that you are giving us free here. I only ask, is it possible for you to start using a dry erase board to actually SHOW how the numbers work out while you are talking? I see most other real estate help channels do this. I think it would help your subscriber base significantly.
+AntBoy 808 Hi there, we do have some videos with a whiteboard, but we'll keep your suggestion in mind! Thank you!
How do you use exchange on buy and hold
Hi Tina, in order to conduct a 1031 exchange, you must work with an intermediary. They can walk you through the process and make sure everything is done in accordance with IRS regulations. We recommend Asset Exchange Co. www.ax1031.com
i thought i understood 1031's, then i watched this and realized i didn't know the half, great video. is there another 1031 video on youtube you would recommend?
Hello! We've got a few podcast episodes on 1031 exchanges: morrisinvest.com/episode53, morrisinvest.com/episode158. Both are interviews with qualified intermediaries, so they know their stuff!
Very helpful thanks
Glad to hear that, thanks for watching!
Marketing Marketing Marketing = SALE
You guy have really good facts
Why two rooms?
excellent, thank you!
Thank you so much for this information God Bless you two ♥️
Thanks, Chris! Glad you liked this one.
Just started listening to rich dad poor dad today. Wow ! My perspective is changing so much! (:
Now that the Whitehouse has released a framework for the proposed tax overhaul, i think you should post a video on your opinion of how those changes could affect the types of investors you work with. You can read it at whitehouse.gov/taxreform. 9 pages. Granted, nothing is set in stone yet.
+Mario Mendieta Thanks for the suggestion, just added it to our list!
Thanks Great video
+Roccwell Thanks, glad you found it helpful!
At 6:29 what the hell are you talking about the parents own 50%? Where did the other 50% go?
To the kids.
i would have watched this video but after listening to them ramble for 3 min about random b.S i decided to never watch any of their videos for wasting my time.
Omg you guys need to get to the point!!
This is a good idea though!
Pretty sure this guy is still on run
You musta already been rich when you met her Clayton. She is so far out of your league. Lol
Strip club!! Lol. Good one!
hahaha! 😂😅
LISTEN, just get to the point. Talk numbers and rules....your losing viewers and definitely potential subscribers
The 1031 exchange is a complex topic, it's not possible to make it super simple. We have other videos that are less complex. Plus, this video has performed very well, but thanks for your concern! 😉
Loopholes of realestate Gareth sutten
I just couldn’t with her ! Omg let him talk
Lmao he said strip club !!!
Isn’t this guy in jail
Wow, look how young you two look. still a sexy couple now and then.
Too much talk
It's a complex topic! We have lots of other short videos as well.
LOL lmao strip club, great content.
Too much chatter. Please get to the point sooner.
Stop with bs get to the points