Are You Tired Of The 3 T’s?
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A 1031 Exchange is one of the most powerful tools available to landlords who want to sell without paying the much-dreaded capital gains tax. Instead of writing a large check to the IRS, you can reinvest your full equity into a DST or a REIT, allowing your money to continue working for you.
This strategy is especially valuable for landlords who have seen significant appreciation. Capital gains taxes can take a substantial portion of your proceeds, but with a properly structured 1031 Exchange, those taxes are deferred along with any depreciation recapture.
A 1031 Exchange opens the door to repositioning your portfolio. You will move from active management and into passive real estate investments so you can say goodbye forever to the 3 T’s: Tenants, Toilets, and Turnovers.
"What’s my rental income now?
What could it be?"
If you could safely boost your rental income and retire from the active management of your rentals, wouldn’t that be great? Well, let’s address the “safely” part first. Every investment has inherent risks, but if your entire nest egg is tied up in one or two rentals, is that truly safe?
Many local landlords feel secure owning in the Bay Area,
and understandably so. Real estate here has created tremendous wealth. So why change? For starters, take a closer look at your cash return on equity. For example, if you own a rental in Menlo Park worth $3,000,000 free and clear, you may be collecting about $6,000 per month. After expenses, your net income might be closer to $4,800—a return of just 2%.
Now consider reallocating that same equity into a diversified REIT or STNL (Single Tenant Net Lease) at around 5%. Your monthly income could increase to approximately $11,750.
Here’s the key: once you have diversified, your investment will be spread across multiple properties rather than concentrated in one. With the same $3,000,000, you gain diversification, stability, and potential increased income.
And there’s another reality to consider. We are long overdue for a major earthquake, and many homeowners lack the insurance. As history has shown, much of the damage comes from fires caused by gas and electrical lines. Diversification helps protect against these risks.
Why keep all your equity in just one or two properties when you can spread your risk and potentially improve your income at the same time?
A 1031 Exchange is not just about tax deferral—it’s about retiring from active management and improving your income. You will be deferring your capital gains tax and depreciation recapture. How much would your capital gains tax be? You can get a pretty good idea with our Capital Gains Tax Estimator. Click here to order.