Recently chatting with some investors, I talked about a 30+ unit property that was already into a high 9.8% returns, however, we found out just the other day that the profits will actually be a tad more! We will easily be into the double digits on this one.
During a lot of our email exchanges one of the things that many of them touched upon was that the profit and return is really going to be smaller than I think because I will need to pay Uncle Sam a nice chunk of that profit in capital gains tax once the property does sell.
According to many of them that will notch my double digit return down a bit…
But here is the good news about paying that capital gains tax that you may not have known about….We don’t have to!
The good news is that investment real estate is one of the only investments that allows you to sell the property and defer the taxes that you would ordinarily have to pay on the sale of the property.
So, this is not a tax free sale but you can defer the capital gains taxes for as long as you want.
Read that again…YOU CAN DEFER TAXES AS LONG AS YOU WANT!
1031 Exchange Real Estate Loophole
The trick is you have to reinvest the proceeds from the sale of the property into another real estate investment property. The nice thing about that too is it does not have to be the same kind of property.
For example, we can sell the 30 unit and take our $270,000 profit and purchase an office building, shopping center, self storage facility or another apartment property.
Heck we can even purchase farmland if we want.
And….Not pay a dime in taxes!
Try that with ANY OTHER INVESTMENT!
And all of the capital gains is deferred and rolled into the next investment property.
Heck, we could theoretically do this as many times as we wanted too. So, if we rolled out profits into say a shopping center we could sell that for a huge profit in say 3 years and roll all of that profit into another property after that!
We can defer those taxes for as long as we want!
NO OTHER INVESTMENT DOES THIS!!
How quickly would your wealth grow if you could defer taxes time and time again?
And this is huge! Because how many times would you have liked to have had this advantage and benefit from your investments in the past?
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