Gilroy Today 2013 03 Spring | Page 20

Hold on to your Real Estate Capital

Due to current appreciation trends in the real estate market and federal and state tax increases , Tax
take place within a dictated period , with the value of one property covering ( contributing to ) the purchase of another . Any exchange
Deferred Exchanges , also known as 1031
requires strategy , trust , and a team who
Exchanges , are reviving in popularity .
understand how to work within the rules of the
If you have real estate holdings you wish
chosen exchange type .
to sell and repurchase without paying taxes
There are many reasons for pursuing a
on your sale income , an exchange may
1031 exchange and many benefits . Whether
be the perfect option . Whether reasons for
you are looking to 1 ) sell a current investment
an exchange are focused on entering into
property to change property type ( i . e . selling
a new type of property ( from Residential
two rental houses or an apartment in order
holdings to Retail , for example
to purchase commercial
) or a new location , an exchange has many benefits .
There are many types of property exchanges ; simultaneous , delayed , reversed , built to suit ,
1031 and 1033 exchange . In today ’ s market , specifically in
In today ’ s market , specifically in California , 1031 exchanges are of considerable and growing benefit to many .
or office buildings , or moving from ownership of raw land to industrial , etc ); 2 ) renewing expiring depreciation value in assets , consolidating investments ; or
California , 1031 exchanges
3 ) following the market
are of considerable and growing benefit to
to achieve greater appreciation . A 1031
many .
exchange can allow sale and purchase of
With new state legislation , California
investment property without the extreme loss of
property holders face huge tax increases
capital through taxation . A 1031 exchange
and therefore a potential reduction in capital
has many subtypes and to know which is
with the sale of real estate . The sale of
right for you is a task for your advisor . In
property ( ies ) means the seller will see new
pursuing a 1031 exchange you should make
charges of up to 20 % Federal Capital
clear to your financial advisors , any partners ,
Gains tax , 13 % State tax , 25 % depreciation
your agent and others what your goals are .
recapture , and 3.8 % Healthcare tax . Do not
Making intent clear will allow your agent and
panic ! There are ways to sell and purchase
advisors to help you transition smoothly to the
without these massive losses in capital . If you
new investment and eliminate improper or
are looking to trade-in your property — to
unsuitable investment properties .
purchase a property of another type or in
As the period of sale and purchase are
a new location — sale and purchase do not
standard , there are some simple but important
have to be strictly separate things , which
ways an investor can ensure a smooth 1031
would trigger taxes due . The answer is 1031
exchange . Here again , the most important
Exchange .
factor to a successful exchange is to have an
In an exchange , the selling party is also
agent who is on point and on board with the
a buying party and both sale and purchase
investor ’ s intent . While often times dictating
By George Renz
George L . Renz , CCIM , ALC was born and raised in Gilroy . He is the broker , owner and operator of Renz & Renz Real Estate Brokerage ; specializing in commercial and investment property sales and 1031 Exchanges in South County and beyond since 1983 . Visit his website at www . renz-renz . com or call 408.846.1031 .
how long it will take to find a buyer with your property on the market , it can often be challenging to find a replacement property . If you already know what type of property you are looking for , it is good to keep current with what is available that might fit your needs .
Strategies for exchange should be discussed with your agent prior to listing . Some investors may find exchange unsuitable for them . But for those who know they are not looking to cash out of investing but are really pursuing a different type of investment or location , a 1031 exchange can help them keep hold of that investment capital and work it into an evolving real estate portfolio .
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