Selling Your Property, 1031 Tax Exchanges And More

In addition to property management, Nesbitt Realty is a full-service real estate brokerage serving Bryce Mountain Resort

After a period of owning a rental unit, rental investors may choose to sell their property. Nesbitt Realty is a full service brokerage and we have successfully and quickly sold many rental units at best market value for our former landlord clients in Bryce Mountain Resort.

If you decide you would like to sell your property, Talk to us and we'll start by preparing a comparative market analysis to help predict what your rental property can likely bring if sold. We'll also prepare estimated proceeds so you understand how much you'll really net at the settlement.

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

A 1031 Tax Exchange is usually of greatest benefit to property owners in Bryce Mountain Resort who have held rental unit for a longer period of time (more than ten years). Thanks to IRC Section 1031, a properly structured 1031 exchange allows a property owner to sell a property, to reinvest the proceeds in a new property 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. An 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 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 demonstrates, exchanges shelter 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 important to have a comprehensive knowledge of the exchange process and the IRC. For instance, an accurate understanding of the key term “like-kind” can reveal possibilities that could have otherwise been overlooked.

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 rental investor clients have found themselves in an untenable situation with regards to their rental unit. 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.

Above all, 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 our area?

Nesbitt Realty's Guide to Real Estate is a free tool for anyone who hopes to find out more about Bryce Mountain Resort and neighboring areas.  The Guide to Real Estate has data about what has sold and what is currently listed, and some interesting facts that you may not know.  Also, our Guide highlights some fundamentals of residing in Bryce Mountain Resort.  Naturally, all of this is interesting for purchasers and sellers, but real estate investors and tenants may also find this data to be quite enlightening.