AAOA Blog

What is a 1031 Exchange and How Can It Save You Money?

an interview with Michael Gray, CPA: Real Estate Investing Tax.com

CPA Michael Gray comes to the table with over thirty years experience is accounting and tax advising. And every year he helps his clients grow their real estate investment portfolios by guiding them through 1031 Exchanges. 

What is a 1031 Exchange?

“It’s a tax deferral tool that allows you to compound your gain on real estate investments tax free.  The ideal candidate for a 1031 Exchange is someone who seeks to acquire and maybe fix up a property, allow it to appreciate, then roll that gain into a bigger investment,” Michael explains.

But navigating the mechanics of the tax code is critical.  Otherwise, the investor falls into a tax trap. “There’s no minimum investment required, but not all transaction qualify for the Exchange,” Michael continues.

For example, a 1031 Exchange:

• Doesn’t work for someone whose intention is to flip properties in short order
• Might require holding the property for at least a couple of tax years

Receiving cash from transaction, exchanging to a smaller mortgage, and the kind of real estate you purchase have an effect on whether you qualify for tax deferral. Tax planning is crucial - seek advice before you invest. A qualified tax adviser can guide you through the ever changing laws and regulations, and help you avoid tight squeezes – like falling victim to a seller seeking extra concessions at the last minute because your time frame for the Exchange is running out.

Get informed. Read Michael’s newsletter at realestatetaxletter.com.

American Apartment Owners Association offers discounts on products and services related to your commercial housing investment, including tenant debt collection, tenant background checks, insurance and financing.  Find out more at www.joinaaoa.org.

This exclusive interview is included on the American Apartment Owners Association’s CD series, Real Estate Investment Secrets, twelve exclusive interviews with industry experts that will supercharge your ability to locate the best investment properties and manage or sell them for maximum profit. 

Real Estate Investment Secrets is available for purchase from American Apartment Owners Association. Join as a Premium Plus member, and receive all of the benefits of our association including Real Estate Investment Secrets free as our gift for joining.  Visit www.joinaaoa.org for more information. 

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