Orange County 1031 Exchange & Other Investor Property Tax Shelters

Posted on September 14, 2016. Filed under: Informed Investor Alliance, Making Life Easier, Orange County Real Estate | Tags: , , , , , , , |

smart-investorGot investment property?

It’s surprising how many property investors we meet who aren’t familiar with 1031 Exchange. Since money doesn’t grow on trees, maybe we can save you some when you decide to sell – read on!

Recently Debbie Bannister with Exchange Resources spoke to our Real Estate Focus group with some 1031 Exchange tips. If you are wondering whether your property fits the mold for a 1031, here are some qualifying terms:

  • Must be an investment property, not a primary residence
  • Property you are exchanging for must be equal or greater value than net sales price
  • Exchange must be done by a qualified intermediary

What kind of properties can be included in a 1031 Exchange?

The properties must be ‘like kind’. Like kind is defined as any real property held for the productive use in a trade or business for investment purposes. Land can also qualify. 1031 properties cannot be for your personal use, but you can put your business in one, per the definition above :). Many investors also ask if the debt on the property counts toward the exchange. The answer is Yes, loan debt is included. If you don’t want to take on new debt, however, you have the option to pay cash as the down payment on your move up property. And if the property you’re purchasing needs work, you can also do an “improvement exchange”. Lots of options!

1031 Exchange Timelines

45 days after the close of your investment property, you must identify a property to buy that is of equal or greater value. If you can’t buy one of the properties you identify for the 1031 exchange, then your exchange is off even if you buy some other property; therefore this is a crucial step. You can identify up to 3 properties, so make sure not to put all your eggs in just one basket. Strategy: identify your favorite on the first day, then wait till day 40-45 to identify your backup options.
180 days to buy, close, and be completely done.


Cashing out funds with a 1031 Exchange

In some situations you may not want loan debt, so a partial exchange is an option. Or maybe you want cash. This is also an option, but talk to your CPA about how much cash you should keep because you will be taxed on it.

Tax intelligent ways to get completely OUT of your real estate investments

Bruce Jones our tax strategist talked to this extent, and you’ve got some options:

  • Charitable property
  • Deferred sales trust (don’t do it – none of our experts recommend this!)
  • Structured sale
  • Traditional installment sale (aka seller carry back)

Remember the IRS is not your enemy, lack of knowledge is.

Bruce suggested to consider coupling a monetized loan with an installment sale. You still get a tax free chunk of change at close of escrow, and you can defer your taxes for 30 years. It’s kinda complicated, so here’s a pic to help!


In case you’re on a mobile & it’s hard to see what’s in the graphic above, here’s the breakdown:

You’ll do a interest only 30 year installment sale:
Seller –(installment sale)–> Dealer –(resale on original terms)—> Final buyer

then, with a Separate investment business loan:
Lender –(loan typically 95% of net sale proceeds)–> Seller –(invests)–> $$$

followed by the Lender’s payment processing and loan guarantee system:
Dealer –(automatic installment payments)–> Payment Processor –(single source limited recourse loan–> Lender

Bruce showed us example after example of SoCal & Orange County property investors he has helped to save hundreds of thousands of dollars. Some even millions, so it’s worth a consultation with him if you decide to cash out all or even some of your real estate portfolio. After all, property investments aren’t all about how much you ‘make’, they are really about how much you get to keep. He’s been utilizing this strategy for almost 20 years and never ran into a problem 🙂

If you’d like a personal introduction to any of our tax experts, Real Estate Focus group consultants, or a list of investment opportunities, just fill out the form below or call / text Angie at 949-338-7408, & we’d be happy to assist!

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Tax Benefits For Home Owners – Make the Most of Orange County Real Estate

Posted on February 11, 2013. Filed under: First Time Buyer help, Informed Investor Alliance, Making Life Easier, Orange County Real Estate | Tags: , , |

As an Orange County Realtor, I can’t technically offer advice on taxes, but I always try to network and meet great tax professionals who can help our clients! Today I sat in on a great session by Irene Mack, CPA, and I wanted to share some notes and insight with you. Irene’s website is if you have any particular questions – she is always happy to talk taxes with you 🙂


Homeowner Tax Benefits

– Mortgage debt relief on up to 2 million loss ($1M if married / filing separate)

Will California extend our debt relief? The answer is still up in the air, but there is a bill on the table. This concerns many homeowners who are thinking about a short sale, so be sure to contact your legislators and let them know you want an extension!

Energy Tax Credits for Homeowners

– many have a $500 max lifetime credit
– some include on site installation costs, some don’t, so be sure to check
– must be on principal residence
– includes central air
– allows tankless water heaters
– solar
– geothermal
– energy star

California Short Sale Tax Benefits

Sb931 focuses on 1st Trust Deed, and ensures lien holders can’t come back to homeowners for deficiency judgement after the short sale.

Sb458 focuses on 2nd trust deeds, and this law came a little after sb931 to help homeowners steer clear of judgements from 2nd mortgages and HELOCs.

Equity Sale Tax Benefits

– No taxes on $500k profit for married couples
– No tax on $250k profit for single filers

Capital Gains Taxes

Will you be taxed if you sell for a profit? Yes, unless your profit is below the $500k/$250k mentioned above.

– Long term (1 year and one day+) is determined on your tax bracket
– It’s best to keep your home ‘long term’ when it comes to taxation

First Time Homebuyer Tax Credit

– 2008 credit – when your home is no longer your personal residence, the balance of repayment becomes due immediately instead of over 15 years, so be careful!

-2009-2010 credit – 36 months of primary residence is required, most of you are almost ready to move up with no penalties 😉

Wow!! Taxes are confusing!!! Make sure to consider your tax benefits and / or penalties when you go to sell your home in Orange County. Irene’s number is 714-957-6936 if you’d like more info.

Remember The Weeks Team is here to help you navigate through tough real estate waters. Be sure to call 877-230-3211 or comment here if we can help you in any way!

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    Orange County, CA Real Estate for hip first-time buyers and investors. Plus, fun things to know and do in OC.


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