Selling Your Property, 1031 Tax Exchanges And More

In addition to property management, Nesbitt Realty is a full-service real estate brokerage serving Whitlers Creek Ii

After a period of owning a rental property, landlords can choose to sell their rental property. Nesbitt Realty is a full service brokerage and we have successfully and quickly sold many rental properties at best market value for our former property management clients in Whitlers Creek Ii.

If you decide you would like to sell your rental, Get in touch with us and we'll start by preparing a comparative market analysis to help figure out what your rental unit can likely bring if sold. We'll also prepare estimated proceeds so you know how much you'll actually take away from the settlement.

What is a 1031 Tax Exchange and how can it benefit me?

A 1031 Tax Exchange is usually of greatest benefit to landlords in Whitlers Creek Ii that have owned rental property for a longer period of time (more than ten years). Thanks to IRC Section 1031, a properly structured 1031 exchange allows a landlord to sell a property, to reinvest the proceeds in a new rental unit and to defer all capital gain taxes. IRC Section 1031 (a)(1) states:

“No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment, if such property is exchanged solely for property of like-kind which is to be held either for productive use in a trade or business or for investment.”

To understand the powerful protection a 1031 exchange offers, consider the following examples:

  1. A rental investor has a $100,000 capital gain and incurs a tax liability of approximately $35,000 in combined taxes (depreciation recapture, federal and state capital gain taxes) when the property is sold. Only $65,000 remains to reinvest in another property.
    Assuming a 25% down payment and a 75% loan-to-value ratio, the seller would only be able to purchase a $260,000 new property.
  2. If the same real estate investor chose to exchange, however, he or she would be able to reinvest the entire $100,000 of equity in the purchase of $400,000 in real estate, assuming the same down payment and loan-to-value ratios.

As the above example shows, exchanges protect rental investors from capital gain taxes as well as facilitating significant portfolio growth and increased return on investment. In order to access the full potential of these benefits, it is critical to have a good working knowledge of the exchange process and the IRC. For instance, an accurate understanding of the key term “like-kind” can uncover opportunities that could have otherwise been dismissed.

What is a short-sale?

A short-sale occurs when the seller sells a property for less than what is owed on the property. In the past, because of market contractions, some of our investor clients have found themselves in an untenable situation with regards to their property. In those cases the best way out was often a short sale. Quite frankly, due to market expansion and inflation, this has not been much of an issue lately.

But even so, if you need it, members of our staff have CPDE (certified distressed property expert) training. We can clarify the ramifications of a short-sale help you decide if that choice is best for you and your property.

Do you want know more about this community?

Our Guide to Real Estate is a helpful tool for anyone who hopes to review important real estate information about Whitlers Creek Ii and surrounding communities.  The Guide to Real Estate compiles data about what has sold and what is for sale, as well as some compelling facts that you may not know.  And, our Guide spotlights quite a few of the elements of residing in Whitlers Creek Ii.  As a matter of course, most of this is useful for buyers and sellers, but real estate investors and renters may also find this data to be very enlightening.