Long-Term Implications of a 1031 Exchange
Entering a 1031 exchange is a smart strategic move for investors, allowing them to defer capital gains payments and keep more of their equity working for them. However, there are long-term implications of continuing 1031 exchange cycles — both good and bad. A proactive investor like yourself should understand these possibilities to better prepare for them in the future.
From Landlord to Legacy: Helping Clients Transition to Passive Income
Direct real estate ownership has long served as a strategy for wealth accumulation among high-net-worth individuals. However, as clients age, or as their priorities shift from growth to legacy, the active responsibilities of property management can become burdensome. For financial advisors, this shift presents an opportunity to help clients consider a transition from direct management to more passive real estate strategies that support retirement income and estate planning objectives.
How To Handle Inherited 1031 Exchange Properties
Inheriting real estate is both a blessing and a financial puzzle, especially for assets that have been previously involved in transactions like 1031 exchanges. If your parents left you such properties, you may be wondering if there are any taxes you need to pay or processes you need to continue. In this article, Realized 1031 discusses 1031 exchange inherited property to help you understand what to do next. Let’s take a closer look.
Understanding DSTs as an Alternative Real Estate Investment
Investors have plenty of options when it comes to alternative investments, with different vehicles offering varying combinations of growth potential, risk management, and diversification. REITs, private equity, and hedge funds are commonly used strategies—but one structure with specific real estate applications is the Delaware Statutory Trusts (DSTs).
Uses and Risks of Using Zero Cash-Flow Properties in a 1031 Exchange
A 1031 exchange is a tax-deferred transaction that can be used to postpone capital gains tax liability when selling and purchasing qualifying real estate. As you purchase a replacement property, there are plenty of options available to find the asset that suits your investment goals. One of these choices is the niche category of zero cash-flow properties. These are highly structured investments where you don’t earn any extra profit, but the income is paid to cover the property’s debt.
Can You Use Multiple Qualified Intermediaries in a Single Exchange?
When conducting a 1031 exchange to defer capital gains, you will need to work with a qualified intermediary. This step is required by the IRS since the intermediary plays a central role in helping the transaction meet regulatory requirements. What if your exchange involves properties in different states or multiple properties? Can you use multiple qualified intermediaries in a single exchange? The answer is yes, but this is generally only applicable in specific scenarios. Below, Realized 1031 has shared when this practice may be considered and the reasons it might be used.. Let’s take a closer look.
Reverse Vs. Forward 1031 Exchanges: Pros and Cons of Each Type
There are a few different ways to conduct 1031 exchanges, potentially deferring capital gains taxes. Named after Section 1031 of the Internal Revenue Code, these exchanges allow investors to reinvest the proceeds from a property sale into a like-kind asset, maintaining their investment without incurring any immediate tax liability.
1031 Exchanges and ESG Investing: Opportunities and Limitations
Many investors today have shifted their focus not only on financial returns but also on the broader impact of their investment strategies. That said, environmental, social, and governance (ESG) factors are increasingly influencing investment decisions for some. For those seeking to align ESG goals with real estate holdings, one potential avenue includes the use of 1031 exchanges.
Dividable Real Estate Assets for Balanced Estate Plans
Advisors helping clients with estate planning often encounter a familiar challenge: dividing real estate equitably among multiple heirs. Unlike liquid investments, real estate assets are traditionally indivisible, illiquid, and emotionally charged. These characteristics can complicate an otherwise well-structured estate plan, leading to potential family conflict, valuation disputes, or forced property sales.
Can DST Investments Be Liquidated Early?
Joining a Delaware Statutory Trust (DST) can offer passive exposure to real estate and potential capital gains tax deferral when used in conjunction with a 1031 exchange. For some investors, there’s always the lingering question regarding liquidity, or your ability to exit the investment and cash out. Can DST investments be liquidated early? The answer is more nuanced than a simple yes or no. While most DSTs are liquidated only after the end of the holding period, there are certain scenarios when early liquidity can happen.
