Last week we welcomed Justin Amos to Plotify's Expert Corner. Justin, the Senior National Sales Manager and 1031 expert at JTC Group, discussed the intricacies of 1031 exchanges and how they can benefit real estate investors. Listen to the full interview a to learn more about his perspective on leveraging 1031 exchanges for tax-advantaged real estate investing.
"The 1031 exchange offers that as a potential of a powerful tool for them to use... you can keep doing that or swap until you drop."
1031 Exchange Basics: Justin explained that a 1031 exchange is a method of deferring capital gains taxes on the sale of business or investment use real estate. He emphasized that while it's been in the tax code for over 100 years, many investors and even some advisors are not fully aware of its benefits.
Flexibility in Property Types: One common misconception Justin addressed is the idea of "like-kind" exchanges. He clarified that investors are not restricted to exchanging for the same type of property. For example, you can exchange a commercial property for residential real estate, as long as both properties are held for business or investment purposes.
Timeline and Identification: Justin detailed the critical timelines involved in a 1031 exchange. Investors have 45 days to identify potential replacement properties and 180 days total to complete the exchange. He stressed the importance of starting the process early and having backup options identified to avoid potential pitfalls.
Leveraging Up: Justin highlighted is the ability to use 1031 exchanges to "leverage up" into larger or more valuable properties. Investors can defer taxes on their gains and potentially use those funds as a down payment on a more expensive property, allowing for portfolio growth and diversification.
Legacy Planning Tool: Justin described 1031 exchanges as an excellent legacy planning tool. He explained the concept of "swap 'til you drop," where investors can continue to exchange properties throughout their lifetime. Upon death, heirs receive a step-up in basis, potentially eliminating deferred taxes altogether.
Working with Professionals: Throughout the interview, Justin emphasized the importance of working with experienced professionals, including qualified intermediaries like JTC Group, CPAs, and real estate advisors who understand the nuances of 1031 exchanges. He noted that this expertise can help investors avoid common mistakes and maximize the benefits of the exchange.
Justin offered many additional insights during the conversation, including the role of qualified intermediaries, the importance of proper identification, and strategies for maximizing the benefits of 1031 exchanges. Don't miss out on listening to the full podcast to learn more about Justin's expertise and perspective on using 1031 exchanges as a powerful tool for real estate investors.
For more information on how Plotify is bridging the gap between active and passive real estate investing, including through the use of 1031 exchanges, check out this related article published by JTC.
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