A 1031 exchange derives it's name from Section 1031 of the U.S. Internal Revenue Service Code that allows investors to defer capital gains taxes on any exchange of like-kind properties for business or investment purposes.
Taxes on capital gains are not charged on the sale of a property if the money is being used to purchase another property - the payment of tax is deferred until property is sold with no re-investment.
The idea behind this section of the tax code is that when an individual or a business sells a property to buy another, no economic gain has been achieved. There has simply been a transfer from one property to another.
For example, if a real estate investor sells an apartment building to buy another one, he or she will not be charged tax on any gains he or she made on the original apartment building.
When the investor sells the original apartment building and purchases a new one, the value used from the original to buy the new one has not changed - the only thing that has changed is where the value is being held.
Showing posts with label Capital Gains. Show all posts
Showing posts with label Capital Gains. Show all posts
Friday, July 11, 2014
Tuesday, June 24, 2014
Your Objective Should Determine Your Strategy
"Of course, objectives are not the railroad timetable. They could be compared to the compass bearing by which a ship navigates. The compass bearing itself is firm, pointing in a straight line towards the desired port. But in actual navigation the ship will veer off its course for many miles to avoid a storm. She will slow down to a walk in a fog and heave altogether in a hurricane. She may even change destination in mid-ocean and set a new compass bearing toward a new port. Perhaps because war is broken out, perhaps only because her cargo has been sold in mid passage. Still, four fifths of all voyages end in the intended port at the originally scheduled time. Without a compass bearing, the ship would neither be able to find the port nor be able to estimate the time it will take to get there." ~Peter F. Drucker
All investors invest for some reason, with some objective in mind. Although objectives may change, they always exist.
As an investor it is important to stay focused, especially during times of market volatility. For best results your objective should determine your strategy.
For more information on investment objectives visit us online at Carlisle Mitchell - Real Estate Tips for Investors.
All investors invest for some reason, with some objective in mind. Although objectives may change, they always exist.
As an investor it is important to stay focused, especially during times of market volatility. For best results your objective should determine your strategy.
For more information on investment objectives visit us online at Carlisle Mitchell - Real Estate Tips for Investors.
Saturday, June 7, 2014
Multi-Family Investment Property
Multi-Family Investment Property is a type of home or building with multiple units owned by one or more parties. Condo buildings and duplexes can be considered multi-family residences; but with a duplex, both the property and the land are recorded on one deed. Whereas with a condo, the owners only own their individual units, not the common space or land, and each have their own deed.
Multi unit residential apartment buildings include multi family investment property of five or more residential units. This type of property can also be owner occupied (although not as common) or all units can be occupied by tenants.
Strategies for investing in multi family investment properties include buying properties at prices below market value and then leasing to tenants.
The investor can rent, refinance or sell for rental income, appreciation, capital gains and tax deductions, depending on the investors goals and objectives.
Multi unit residential apartment buildings include multi family investment property of five or more residential units. This type of property can also be owner occupied (although not as common) or all units can be occupied by tenants.
Strategies for investing in multi family investment properties include buying properties at prices below market value and then leasing to tenants.
The investor can rent, refinance or sell for rental income, appreciation, capital gains and tax deductions, depending on the investors goals and objectives.
Thursday, May 23, 2013
8-Ways to Make Money On Investment Properties
The key to building true wealth in real estate is through buying and holding. A good tenant can create wealth for you by paying for the mortgage, insurance, taxes and monthly fees through their rental payment to you. In addition, you have an asset leveraged for a fraction of the value.
For example, let's say you purchased a condo at $150,000 for $15,000 down payment. If it grows at 5 percent per year ($7,500 first year, etc.) you're making more than 50 percent on the money you invested -- which beats most traditional investments.
Real estate investing allows investors several ways to make and/or save money that other investment tools will never allow or have the ability to provide.
Successful investors don't just look at appreciation to make money. Here's how you can build wealth through your real estate investing:
1) Positive cash flow
This is simply what it sounds like -- the rent covers the mortgage, taxes, insurance, fees, etc., and once all that's paid, you have money left over at the end of the month. A wise investor will also have enough money in reserves to cover all these expenses for a few months in case the property goes vacant.
2) Pay down in principal
As the mortgage shrinks from the mortgage payments, your equity grows (and so does your net worth). This is one of the most powerful means of wealth growth -- using OPM (other people's money) to build your net worth. The tenant is providing the investor with hundreds or thousands of dollars per month to pay off debt, which turns into equity for the landlord.
3) Improvements
This is the fixer-upper that most people think about when investing in real estate. Purchase a property for $50,000, put in another $25,000, and voila, the house is now worth $125,000 ($50,000 more than the initial investment).
4) Wholesale purchases
The most effective way to build net worth and equity is to buy a house for a bargain price. These properties would be the pre-foreclosure, foreclosure, tax sales, etc., where the investor buys the property well below market price. In essence, you make your money when you buy the house at such a low rate.
5) Tax deductions
One of the greatest benefits about real estate investing is all the tax breaks allowed for these type investments. Uncle Sam allows many tax deductions, tax credits and other government-sponsored programs connected with real estate investing that cut the investor's tax bill, thus, increasing the bottom line and equity growth.
6) Asset Management
Many novice real estate investors lose money simply by not managing the asset wisely. For instance, painting properties before the wood is actually peeking through will keep the asset in good shape, seal the wood, and protect it from more expensive damage. Managing the asset is just as important as buying smart and cash flow. The real estate investment is a commodity, not a money machine, and must be managed and protected to maintain future growth potential.
7) Value appreciation
As your property increases in value, so does your wealth. This is the old fashioned principle of buy and wait. Buy at today's prices and with time, your asset will grow in value due to appreciation. In addition, your equity will grow along with the amortization principle mentioned above.
8) Rent appreciation
As the cost of living increases, so, too, should your rent cash flow. Increasing your rental income per month by 5 percent could result in hundreds of dollars of cash flow per year -- year after year.
For example, let's say you purchased a condo at $150,000 for $15,000 down payment. If it grows at 5 percent per year ($7,500 first year, etc.) you're making more than 50 percent on the money you invested -- which beats most traditional investments.
Real estate investing allows investors several ways to make and/or save money that other investment tools will never allow or have the ability to provide.
Successful investors don't just look at appreciation to make money. Here's how you can build wealth through your real estate investing:
1) Positive cash flow
This is simply what it sounds like -- the rent covers the mortgage, taxes, insurance, fees, etc., and once all that's paid, you have money left over at the end of the month. A wise investor will also have enough money in reserves to cover all these expenses for a few months in case the property goes vacant.
2) Pay down in principal
As the mortgage shrinks from the mortgage payments, your equity grows (and so does your net worth). This is one of the most powerful means of wealth growth -- using OPM (other people's money) to build your net worth. The tenant is providing the investor with hundreds or thousands of dollars per month to pay off debt, which turns into equity for the landlord.
3) Improvements
This is the fixer-upper that most people think about when investing in real estate. Purchase a property for $50,000, put in another $25,000, and voila, the house is now worth $125,000 ($50,000 more than the initial investment).
4) Wholesale purchases
The most effective way to build net worth and equity is to buy a house for a bargain price. These properties would be the pre-foreclosure, foreclosure, tax sales, etc., where the investor buys the property well below market price. In essence, you make your money when you buy the house at such a low rate.
5) Tax deductions
One of the greatest benefits about real estate investing is all the tax breaks allowed for these type investments. Uncle Sam allows many tax deductions, tax credits and other government-sponsored programs connected with real estate investing that cut the investor's tax bill, thus, increasing the bottom line and equity growth.
6) Asset Management
Many novice real estate investors lose money simply by not managing the asset wisely. For instance, painting properties before the wood is actually peeking through will keep the asset in good shape, seal the wood, and protect it from more expensive damage. Managing the asset is just as important as buying smart and cash flow. The real estate investment is a commodity, not a money machine, and must be managed and protected to maintain future growth potential.
7) Value appreciation
As your property increases in value, so does your wealth. This is the old fashioned principle of buy and wait. Buy at today's prices and with time, your asset will grow in value due to appreciation. In addition, your equity will grow along with the amortization principle mentioned above.
8) Rent appreciation
As the cost of living increases, so, too, should your rent cash flow. Increasing your rental income per month by 5 percent could result in hundreds of dollars of cash flow per year -- year after year.
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