Real Estate Investing Podcast

1031 Exchange Rule Changes & Real Estate Deed Fraud
Posted Thursday, May 20th, 2021 by Richard Roy

In this episode, we’ll be discussing the 1031 exchange, what it is, and the proposed legislation change that will impact property investors. In Neighborhood Chat, Brett tells us about his weekend trip in East Tennessee and a new tiny home rental project he’s been working on there. We’ll finish by discussing what steps the courts need to put in place in order to protect homeowners from the ongoing title theft problem.

Alright, so let’s discuss the 1031 exchange proposed changes, which would affect real estate investments where the profits exceed $500,000. This is part of Biden’s $1.8 trillion American Families Plan and is alleged to target some tax loopholes. The only thing I don’t know is what are the loopholes? The article refers to tax loopholes that have been in effect since 1921. It appears that the media has been calling these loopholes. Oh, the media love those loopholes. Whenever they say close loopholes, that means you’re making too much money and we’re not gonna allow that to happen anymore. That’s what I take from it.

The proposal is to change the 1031 exchange rules. For those of you who don’t know, 1031 exchanges allow you to move money from one property investment to another property investment, without incurring capital gains tax. Let’s say you own two properties in California worth $1million, and you want to move that money to other real estate investments. I’m going to give you an example that one of my investors is doing right now. He’s selling his California property and he’s moving that $1million to Memphis because he can buy eight homes producing about $6,000 a month growths here with that $1million, versus getting $3,800 a month out or so with the California investments. He’s going to almost double his investment by moving that money because he can buy so much more. So what he’s gonna do is a 1031 exchange. He will sell his California investment property and put it into a 1031 exchange, by using a licensed agent who does 1031s, he will then have 45 days to go out and find like properties. Once an investment property is located, I believe it’s 60 days from that date to close. If you do that, then there’s no capital gains tax because your profit from those properties is tax-exempt, as long as you’re investing into like property.

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