Pacific Real Estate Investments
Under a §1031 tax deferred exchange, a property owner trades one property for another without having to pay any federal income tax on the transaction.
John Kennedy is well versed in the details of the exchange process. Over 90% of his business since 1990 has been assisting clients with the selling and buying aspects of §1031 tax deferred exchanges.
Our clients have various reasons for conducting a tax deferred exchange:
- Defer taxes, allowing reinvestment of a higher percentage of sale proceeds.
- Re-leverage to improve both loan-to-value (LTV) percentage and interest rate/terms.
- Move equity to newer property, better location, or both.
- Consolidate smaller properties into larger property for better management or operating efficiencies.
- Transfer from non-income producing real estate to income producing real estate (e.g., land to apartments).
- Multiple owners divest ownership of a single propertly and exchange separately.
- Estate planning may require exchanging into similar properties for equal distribution.
A §1031 tax deferred exchange makes it possible to reinvest the full amount of a capital gain, rather than just the "after tax" amount, in another property. For example:
- An investor has a $200,000 capital gain and, after $70,000 in taxes, has $130,000 to reinvest in another property. Assuming a 25% down payment and a 75% loan-to-value ratio, the seller can purchase a $520,000 new property.
- Under an exchange, however, this same investor can reinvest the entire $200,000 of equity in the purchase of $800,000 in real estate, assuming the same down payment and loan-to-value ratios.
The precise orchestration of a tax deferred exchange is crucial to accomplishing your real estate investment goals.
John Kennedy is well versed in the details of the exchange process. Over 90% of his business since 1990 has been assisting clients with the selling and buying aspects of §1031 tax deferred exchanges. Countless transaction hours in this niche of real estate have provided Pacific Real Estate Investments ways to hedge our clients' successes by using closing extensions, earnest money and conducting pre due diligence.
