Matt, amazing primer video on 1031 exchanges. A lot of great information to get people started. To build on your 180 day comments; a reverse exchange can be a great way to circumvent the uncertainty of a replacement to an extent. In these scenarios the replacement property is purchased before the original property is relinquished. The concept is the same, title is held with the QI etc just in reverse order. Obviously, this only works if you have the capital and capacity to purchase the replacement property without the capital inflow from the original property. You also need to have confidence in your ability to sell the original property for your asking price within the 180 day window. It can be a powerful tool in the right circumstances/scenarios.
Karolis - thanks for the comment. I have heard of reverse 1031 exhanges but never seen them implemented in the field. If you have the capital it would be a good way to ensure that you can complete the transaction.
Good video, Matt. I found 4 things that need clarification. 1.) Section 1031 Exchange property is not "rental real estate." It is investment property: "property held for productive use in a trade or business or for investment." It actually includes personal property as well. 2.) Yes, land does qualify for Section 1031 Exchange treatment, if it meets the above definition. 3.) "Investment intent" is a myth. At the time you sell the property, it was either "held for productive use in a trade or business or for investment" or it was not. What you originally intended to do with it is irrelevant. What you did with it is what counts. 4.) In that same regard, "holding for a couple of months with tenants in there" will not qualify the property for Section 1031 Exchange treatment. And, No, there is no way to "circumvent the 180 day requirement." I invite you to read my book, "How To Do A Section 1031 Like Kind Exchange" available in print and digital on Amazon. www.amazon.com/Section-1031-Like-Kind-Exchange-ebook/dp/B01MY433L6/. You can do a quick "Look Inside" to see the extent of the coverage. And I go into the Reverse Exchange, the Build-to-suit Exchange, the cash-out refinance, and other interesting areas. Keep promoting the 1031. It's the best part of the Internal Revenue Code. Michael Lantrip, Author, "How To Do A Section 1031 Like Kind Exchange."
Matt, i had previously did a 1031 exchange, i had the proceeds from the sale sent to an attorney and he held it in his escrow account, and then he sent it to the closing agent for the new property. Is this acceptable ?. I have read some info where the QI has to actually sell the first property, buy the second then transfer to you.
Great video! Thanks! In 2020 I did a 1031 through Starker. • The settlement statement shows sale price $315,000. • The relinquished property, a single family home, was purchased by my daughter. A Gift of Equity of $63,000 was given to help her with the costs of the purchase. • All other requirements have been met. • Cost of replacement property is $300,000. • If the gift of equity is treated as a price reduction, the $252,000 relinquished meets the price requirements. • If it is treated as a cost of sale, it does not. How should this be reported?
I read somewhere that to do a 1031 exchange you must use a "Qualified Intermediary" who hold the funds between the sale and purchase and manages the documentation. Is this true? Or can I manage and document the 1031 exchange myself?
Derosa Group thanks, and a presentation in Lynnwood Wa would be great, we have a great convention center here, just outside Seattle. Now, go take your family out to breakfast!
Glad it was helpful! We are working on a really awesome series on buying a 336 unit apartment complex. Check it out. Great way to upgrade with a 1031 is to buy a larger MFH apartment.
matt, question for you. If you sell a 2 family rental property, you follow rules for a 1031 exchange for a lake front property to rent out. how long do you have to keep lake property as rental? what if after 1,2,3 years you dont want to use for rental. what happens then?
Great question. I'm not an accountant, so bear that in mind. You should talk to one about your plans. My opinion is that since the property was booked as a rental when you did the 1031 you would need to maintain it as such. That could be renting it a week or two a year and you could rent it to someone you know, and what you charge them is your choice. Just my opinion tho.
It all has to do with how your CPA books it. Land value, building value, and fixtures all play a part in cost basis. Speak to your CPA for more details
you have to send them all your sales proceeds, so sell price minus closing costs minus payoff of any mortgage. All cash from closing goes to the new purchase
Hey Matt, great video. I'm thinking about doing a 1031 from a rental home into a new fourplex.. so I would have the new building built. Because timelines are so tight with 1031, what's your advice on going 1031 to new construction? Thanks!
Let’s say I put 20% from my own pocket for a new pocket but my 1031 funds are not enough to cover the cost of the new property. Can I use debt? Downpayment + 1031 funds + new mortgage. Sounds like a silly question but I wanted to ask abyways
so to my understanding by doing the 1031 exchange since the money is held my a third party I would not claim any of the proceeds on my taxs or be taxed on the full amount of the sale if it is reinvested in a 1031 exchange correct
Great video, i do have a couple of questions though. Can the exchange money be used as a down payment for a mortgage, or does it need to be an all cash purchase? For example, if my capital gains on the sell is 100k could i use 1031 to put 20% down on 5 more 100k properties? Second question, would I be able to add funds to the purchase? Lets say I have 100k in the 1031, the house I would like to purchase is 130k and I want to do all cash. Can i add 30k from my bank account or maybe even a second 1031?
Yes and yes. You could split that $100k up into $20k down payments on 5 properties. For the all cash transaction you can add personal cash to the transaction.
I sold a property for $2 million. I have to pay off the mortgage of $800k, leaving me $1.2 m on hand. Do l have to invest $2 m instead of $1.2 m in order to comply with 1031 exchange rule? This question has puzzled me for a long time and I can't find a video talking about this. thanks!
You need to invest all the proceeds from the sale AND the new property must have a price of higher than the sell price of the first property AND it must be held in the same name as the name that held the first property.
You would be in violation of the 1031 rules. Once you identify your potential purchases, you MUST buy one of them, or a combination thereof. That's why its so important to get the list right at the 45 day milestone.
Thanks! Have you read Matt's book yet? If so, please leave it a review on Amazon! Here's the link: www.amazon.com/review/create-review/?ie=UTF8&channel=glance-detail&asin=B07G4J5TMY
will this work for forex traders...say i wanted to take my forex profits and roll it directly into an exchange...for property or a rare painting , classic automobile or something like that
I have a condo which is worth 500 thousand and has a mortgage of 260 thousand. Could I do a 1031 exchange for a condo of higher value and don't carry any mortgage ( buy the new condo and pay cash).
No, only because the new purchase in a 1031 must be more than the sell price of the sold property. So if you sell for 500k, you need to buy for more than that.
Hi sorry to bother you, but I have another question please... After I cash out-refinance the property, can I sell it after one year using land contract (cotract for deed). I meant is it ok or legal? Also is the institutional lender will be ok with that? Thank you in advance.
Thanks for the video Matt. I plan to purchase a residential house as the replacement property in a 1031 exchange. How long do I have to keep it rented before I am allowed to use it as my primary residence?
Hi Matt, great video, I have a question, how can I calculate the gain if I did buy a house and I paid $100K cash from my saving, now I sold it for 280k and I paid realty fees and took 2506k clean, now Do I have to pay taxes only in the gain which was 150k, what about my 100K I do not have to pay taxes on it because it was my saving. Can you tell what I can I do to resolve the 1031 Exchange form. Thank you Hernan Mosquera
Hello Thank you for this great video. I have a rental single house for 7 years already. Its value around 200k now. I d like to do the 1031 for a property much higher price 500k +. And if I'm not qualified for a loan for the rest of the price. Can I do a TIC with another qualifier? Please advise. Thanks in advance.
Hey Jacob! Thanks for reaching out. We don't have TIC investments as of now. We do offer syndications from time to time, you should subscribe to our newsletter to stay in the loop on what we have in the pipeline. Also, if you want to setup a conference call to talk further please shoot an email to Info@DeRosaGroup.com.
You never mention if you were to sell a property in December and have 45 days to claim potential properties are you taxed in 2018 on your gains versus finding a property in 2019?
Good question. You would be able to carry the gain over into the new year and use it on the new purchase, just make sure your CPA is in the loop before you sell the first property
Do you have to use the entire amount of the sale of your current property in the exchange? Can you withhold a portion of it? For example, i'm selling my property for $112k. I initially purchased the property for $60k and have paid it off. Can I withhold $60k of it and use only $52k in the exchange? Would I be taxed for the $60k? I'm not talking about waiting the 180 days period but to withhold the $60k up front. Thank you.
Matt, great video - couple related questions - is there a limit in how much one can roll over to the new property? For example, if one sold the first property for $300,000 and is that person limited to $600,000 on the new property or can they buy something for let's say $1 mm? Thanks.
Lol in first 2 minutes he is like idk if you can do it on land easy - pretty is to find out if dont know....."All forms of land, including undeveloped land, are eligible for a 1031 exchange." Then he says you'll pay income tax on sale...wrong! capital gains tax - pretty big difference.
Thanks! Love your thoughts, your awesome. Here's some free goodies. Just text DEROSA to 66866 for several hours of video training, articles, and other stuff you can't get anywhere else. Enjoy!
So I'm confused. You call this everything you need to know about 1031 exchanges yet in the first minute or two you mention exchanging land and then you say you don't know about exchanging land.
You can't have every rule or exception included in a 16 min video. Do some due diligence on that topic as he recommended. Otherwise I found it to be very informative
![Felix "Unfair" | [Stray Kids : SKZ-PLAYER]](http://i.ytimg.com/vi/Oswujxm2Ag0/mqdefault.jpg)
Matt, amazing primer video on 1031 exchanges. A lot of great information to get people started.
To build on your 180 day comments; a reverse exchange can be a great way to circumvent the uncertainty of a replacement to an extent. In these scenarios the replacement property is purchased before the original property is relinquished. The concept is the same, title is held with the QI etc just in reverse order. Obviously, this only works if you have the capital and capacity to purchase the replacement property without the capital inflow from the original property. You also need to have confidence in your ability to sell the original property for your asking price within the 180 day window. It can be a powerful tool in the right circumstances/scenarios.
Karolis - thanks for the comment. I have heard of reverse 1031 exhanges but never seen them implemented in the field. If you have the capital it would be a good way to ensure that you can complete the transaction.
Good video, Matt. I found 4 things that need clarification.
1.) Section 1031 Exchange property is not "rental real estate." It is investment property: "property held for productive use in a trade or business or for investment." It actually includes personal property as well.
2.) Yes, land does qualify for Section 1031 Exchange treatment, if it meets the above definition.
3.) "Investment intent" is a myth. At the time you sell the property, it was either "held for productive use in a trade or business or for investment" or it was not. What you originally intended to do with it is irrelevant. What you did with it is what counts.
4.) In that same regard, "holding for a couple of months with tenants in there" will not qualify the property for Section 1031 Exchange treatment.
And, No, there is no way to "circumvent the 180 day requirement."
I invite you to read my book, "How To Do A Section 1031 Like Kind Exchange" available in print and digital on Amazon. www.amazon.com/Section-1031-Like-Kind-Exchange-ebook/dp/B01MY433L6/.
You can do a quick "Look Inside" to see the extent of the coverage. And I go into the Reverse Exchange, the Build-to-suit Exchange, the cash-out refinance, and other interesting areas.
Keep promoting the 1031. It's the best part of the Internal Revenue Code.
Michael Lantrip, Author, "How To Do A Section 1031 Like Kind Exchange."
Does your book explain how to do the 1031 exchange on my own? Or must I use a tax acct / Fincl advisor?
Like kind property? So this means if you own a business auto repair you cannot but like 8 houses and rent them out? You need to but another auto shop?
Great information. Thanks
Your welcome!!
Love your videos Matt. Can't wait to start in real estate. All your videos are great. Thank you so much!
Very grateful,
Daniel
Matt, i had previously did a 1031 exchange, i had the proceeds from the sale sent to an attorney and he held it in his escrow account, and then he sent it to the closing agent for the new property. Is this acceptable ?. I have read some info where the QI has to actually sell the first property, buy the second then transfer to you.
Hey Mike, I dont think it's that complicated, but you should ask your CPA as they will be filing the docs to keep you tax exempt on the sale.
Great video! Thanks!
In 2020 I did a 1031 through Starker.
• The settlement statement shows sale price $315,000.
• The relinquished property, a single family home, was purchased by my daughter.
A Gift of Equity of $63,000 was given to help her with the costs of the purchase.
• All other requirements have been met.
• Cost of replacement property is $300,000.
• If the gift of equity is treated as a price reduction, the $252,000 relinquished meets the price requirements.
• If it is treated as a cost of sale, it does not.
How should this be reported?
It should be reported to your CPA, LOL!!
I read somewhere that to do a 1031 exchange you must use a "Qualified Intermediary" who hold the funds between the sale and purchase and manages the documentation. Is this true? Or can I manage and document the 1031 exchange myself?
A podcast on this would be great with a knowledgable attorney. I have so many more questions.
KidCity Lynnwood I will see if we can make that happen on the Real Estate InvestHer show
Derosa Group thanks, and a presentation in Lynnwood Wa would be great, we have a great convention center here, just outside Seattle. Now, go take your family out to breakfast!
Awesome information and very clear, thanks 👍🌺
Glad it was helpful! We are working on a really awesome series on buying a 336 unit apartment complex. Check it out. Great way to upgrade with a 1031 is to buy a larger MFH apartment.
matt, question for you. If you sell a 2 family rental property, you follow rules for a 1031 exchange for a lake front property to rent out. how long do you have to keep lake property as rental? what if after 1,2,3 years you dont want to use for rental. what happens then?
Great question. I'm not an accountant, so bear that in mind. You should talk to one about your plans. My opinion is that since the property was booked as a rental when you did the 1031 you would need to maintain it as such. That could be renting it a week or two a year and you could rent it to someone you know, and what you charge them is your choice. Just my opinion tho.
Any chance you could explain basis in new property. I have conflicting info.
It all has to do with how your CPA books it. Land value, building value, and fixtures all play a part in cost basis. Speak to your CPA for more details
So do you just send the gain to the 1031 Exchange or the total sale price?
you have to send them all your sales proceeds, so sell price minus closing costs minus payoff of any mortgage. All cash from closing goes to the new purchase
How does the QI get paid?
They charge a fee at closing
Hey Matt, great video. I'm thinking about doing a 1031 from a rental home into a new fourplex.. so I would have the new building built. Because timelines are so tight with 1031, what's your advice on going 1031 to new construction? Thanks!
Buy the land with the 1031 money, then get a construction loan for the development of the building. That should work
Let’s say I put 20% from my own pocket for a new pocket but my 1031 funds are not enough to cover the cost of the new property. Can I use debt? Downpayment + 1031 funds + new mortgage. Sounds like a silly question but I wanted to ask abyways
Yes, you can blend 1031 funds, new debt, and new cash out of your pocket
so to my understanding by doing the 1031 exchange since the money is held my a third party I would not claim any of the proceeds on my taxs or be taxed on the full amount of the sale if it is reinvested in a 1031 exchange correct
Great video, i do have a couple of questions though. Can the exchange money be used as a down payment for a mortgage, or does it need to be an all cash purchase? For example, if my capital gains on the sell is 100k could i use 1031 to put 20% down on 5 more 100k properties? Second question, would I be able to add funds to the purchase? Lets say I have 100k in the 1031, the house I would like to purchase is 130k and I want to do all cash. Can i add 30k from my bank account or maybe even a second 1031?
Yes and yes. You could split that $100k up into $20k down payments on 5 properties. For the all cash transaction you can add personal cash to the transaction.
I sold a property for $2 million. I have to pay off the mortgage of $800k, leaving me $1.2 m on hand. Do l have to invest $2 m instead of $1.2 m in order to comply with 1031 exchange rule? This question has puzzled me for a long time and I can't find a video talking about this. thanks!
You need to invest all the proceeds from the sale AND the new property must have a price of higher than the sell price of the first property AND it must be held in the same name as the name that held the first property.
What if you buy another property other than the 3 original potentials you had 1st invision
You would be in violation of the 1031 rules. Once you identify your potential purchases, you MUST buy one of them, or a combination thereof. That's why its so important to get the list right at the 45 day milestone.
But what if all 3 identified properties sell?
If the 3 properties sell, but willing to move forward with another to comply the 1031 should be good right?
Thanks you, clear Explanation!
Thanks! Have you read Matt's book yet? If so, please leave it a review on Amazon! Here's the link:
www.amazon.com/review/create-review/?ie=UTF8&channel=glance-detail&asin=B07G4J5TMY
will this work for forex traders...say i wanted to take my forex profits and roll it directly into an exchange...for property or a rare painting , classic automobile or something like that
how much can you use to buy another property is it the profit or the value of the house you sell o the price they bought the property?
If you buy a apt building fix up put new tenants in. You have to hold 1 year?
If you want to avoid short term capital gains taxes versus long term capital gains which could be around 10 to 20 percent depending on tax bracket
You don't have to hold it for any specified period, that rule applies for smaller deals.
This is a great video! I did not understand the 45 & 180-day rule until I watched this video.
I thought if the gain is 100k for example you’ll only pay capital gains of 15%? Is there something else I’m missing
Yes, but a 1031 allows you to defer all of it, no tax.
I have a condo which is worth 500 thousand and has a mortgage of 260 thousand. Could I do a 1031 exchange for a condo of higher value and don't carry any mortgage ( buy the new condo and pay cash).
No, only because the new purchase in a 1031 must be more than the sell price of the sold property. So if you sell for 500k, you need to buy for more than that.
Can I hold a property indefinitely when I 1031 exchange?
Yes, there is no mandate to sell in the future
Hi, thank you for the great information. I have question please: is the money that I get from the Cash Out-Refinance taxable??????? Thank you.
Wissam Goro nope, that's a loan. It's not taxable
Derosa Group thank you so much
Hi sorry to bother you, but I have another question please... After I cash out-refinance the property, can I sell it after one year using land contract (cotract for deed). I meant is it ok or legal? Also is the institutional lender will be ok with that? Thank you in advance.
Thanks for the video Matt. I plan to purchase a residential house as the replacement property in a 1031 exchange. How long do I have to keep it rented before I am allowed to use it as my primary residence?
cliff schmidt that's a grey area, I would talk to your CPA about living in a 1031 property. I'm sure it can be done, but be very careful!
Great presentation and very useful information. Thank you!
Hi Matt, great video, I have a question, how can I calculate the gain if I did buy a house and I paid $100K cash from my saving, now I sold it for 280k and I paid realty fees and took 2506k clean, now Do I have to pay taxes only in the gain which was 150k, what about my 100K I do not have to pay taxes on it because it was my saving. Can you tell what I can I do to resolve the 1031 Exchange form.
Thank you
Hernan Mosquera
You only pay taxes on the profits not the total
Hello
Thank you for this great video.
I have a rental single house for 7 years already. Its value around 200k now. I d like to do the 1031 for a property much higher price 500k +. And if I'm not qualified for a loan for the rest of the price. Can I do a TIC with another qualifier? Please advise. Thanks in advance.
You can likely pull that off, but you should talk to a really good attorney before you go and sell the single family
New property cant be more than double price. If you sell yours for 200k. Max new property can be is 400k. Double check with irs.
Robert Bull I thought it didn’t really matter?
Great Info! Thanks Matt.
You are welcome!
Can you identify more than 3 potential properties?
Nick - no, 3 is the max if it's a one property for one exchange. of you are going to buy more than one to complete the exchange you can identify more
Can I 1031 exchange from an investmental to a primary residence
no
you the man! do you have any TIC available. i would like to take part ownership :)!!!
Hey Jacob! Thanks for reaching out. We don't have TIC investments as of now. We do offer syndications from time to time, you should subscribe to our newsletter to stay in the loop on what we have in the pipeline. Also, if you want to setup a conference call to talk further please shoot an email to Info@DeRosaGroup.com.
Oh TIC is just a safety net if the 1031 failed (means when I already sold the rental property). Got it !
You never mention if you were to sell a property in December and have 45 days to claim potential properties are you taxed in 2018 on your gains versus finding a property in 2019?
Good question. You would be able to carry the gain over into the new year and use it on the new purchase, just make sure your CPA is in the loop before you sell the first property
Is there any geographical limitation in the new identified property?
R poole No, as long as it's in the usa.
Do you have to use the entire amount of the sale of your current property in the exchange? Can you withhold a portion of it? For example, i'm selling my property for $112k. I initially purchased the property for $60k and have paid it off. Can I withhold $60k of it and use only $52k in the exchange? Would I be taxed for the $60k? I'm not talking about waiting the 180 days period but to withhold the $60k up front. Thank you.
Yes, you have to use 100% of the sales proceeds
Matt, great video - couple related questions - is there a limit in how much one can roll over to the new property? For example, if one sold the first property for $300,000 and is that person limited to $600,000 on the new property or can they buy something for let's say $1 mm?
Thanks.
There is no limit, the new property just needs to be more than the one sold
@@DeRosaGroup appreciate the quick response - u r the best!
Lol in first 2 minutes he is like idk if you can do it on land easy - pretty is to find out if dont know....."All forms of land, including undeveloped land, are eligible for a 1031 exchange."
Then he says you'll pay income tax on sale...wrong! capital gains tax - pretty big difference.
Whoops! Guess we got those mixed up in the moment! Thanks!
“A little more smoke 💨 “
Thanks! Love your thoughts, your awesome. Here's some free goodies. Just text DEROSA to 66866 for several hours of video training, articles, and other stuff you can't get anywhere else. Enjoy!
So I'm confused. You call this everything you need to know about 1031 exchanges yet in the first minute or two you mention exchanging land and then you say you don't know about exchanging land.
You can't have every rule or exception included in a 16 min video. Do some due diligence on that topic as he recommended. Otherwise I found it to be very informative
@@GrubReviews For Gods sake, its just knowing if land is the same as a structure.
Great video Matt, Thanks.
Glad you liked it!