Here are the basics of 1031 tax-deferred exchanges for investors. 

What do 1031 tax-deferred exchanges mean for real estate investors? 

If you own an investment property, at some point most of the profits from it level out—it stops appreciating. Then you may decide to sell the property and buy something with a higher value that will continue to increase in value. A 1031 exchange allows investors to sell one property and buy a more expensive one and not pay the capital gains between what they bought the first property for and what it’s worth now. Let’s say your property is now worth $100,000 more than what you bought it for; you can move all that equity to the second property and not pay capital gains taxes. 

“At some point, most investment properties stop appreciating.”

If you’re an investor interviewing real estate agents, the most crucial question to ask is if they’re an investor too. Ask to see their portfolio—is what they’ve done similar to what you want to do? You need to ensure they know a lot about investing and don’t just buy and sell houses. If you’re considering investing in real estate, most of our agents (including me) have investment properties, and we’d love to have that conversation with you. 

If you have any questions or want to have that investment conversation with us, visit our website or give us a call. We would love to help you.