Newbie Investor Needs help on 1031 Exchange

[Oscar Chirinos]

Good Evening BP Community.

First of all thank you so much for all the information you guys provide on here, is really awesome!

I am puzzled as to what my options are or on how my exchange would work?

One of my properties

It costed me 215k (Bought it in Utah around 2015) it is now selling for 290k (So about 75k profit minus real estate fees commission etc) i owe about 198k on the home so is about 92k before expenses

I have about 30k in savings, plus cashing out on this property, I am planing to acquire 4 rental properties in Indianapolis in the range of 50-75k a piece, my question is how can i not pay taxes on my profit. is it by buying properties equaling to more than the sale price of my home? is that how it works??

Thanks so much for all your help!

Oscar

[Robert Hetsler]

Cody L. Makes an important distinction as I like to think of an exchange as kicking the ball down the road and that is the reason they are not heavily audited. However, if you continue to kick the ball down the road to the point where the property is ultimately inherited upon death, your heirs will receive the step up basis and those capital gains will be erased. This is how the Rockefeller's, Vanderbilt's, and Kennedy's all were and still do, in some cases pass generational wealth down for generations. So an exchange can be a very valuable permanent tool.

I would also just caution that if you plan to purchase more than three properties, please make sure to choose the correct replacement property identification method as one of the methods limits you to three properties and another method allows you to identify up to 10 properties but the sum of the ten cannot exceed 200% of the value of the property you are selling. Just make sure you work with an experienced and highly educated intermediary as that will inevitably make the process so much easier. Good luck!