Bob Nelson, Eugene real estate commercial broker, Pacwest Real Estate Investments, and Marcia Edwards, Eugene residential broker, Windermere Real Estate, look at ways to approach planning your real estate investments. They discuss how to increase your odds of investment success and the role of the 1031 exchange.
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I’ve done thousands of transactions using the 1031 exchange on investment real estate. It’s something that intrigued me in my very first year of real estate, and I’ve been doing it for 51 years. The 1031 is an extremely intricate transaction. If you understand it, play by the rules, and execute it well, it provides a great benefit.
The benefit is that you get to sell something, not have to pay tax on it, use all of your equity, forward it into the next deal, and then continue doing that until such time as I sell and don’t further exchange.
This is a great strategy for investment success, and there are ways to increase your probability for long-term success with your investment plan.
Bob Nelson, Eugene Commercial Real Estate Investment Broker:
The first step to increasing your probability of success is to identify what you own. Now, if you own one property, that’s fairly easily done. But if you’re further along with your investment life and you own three or four or five or a dozen things, each quarter you should take a look at how productive each of the assets in fact would be.
Is one of them lagging behind and is there anything you can do to fix it? If not, why not get rid of the runt of the litter, so to speak? Sell it, do a 1031 into something that’s more productive or more fun to own. Know what you have and adjust accordingly.
In some instances the solution might not be selling, but it might be refinancing. You can look at many parts of the asset. It could be rate of return. It could also be what’s coming up as capital improvements needed and things like that. In that case, if you do not have the money to cover it so you sell it as a fixer, somebody will buy it and probably not penalize you as much as the cost would have been to fix it to begin with.
It does no harm to look for better opportunities at any point in time. At least annually it makes sense to know what would look better to you and seek that out. Then there is the issue of staying current with the economic changes and understanding when there are opportunities and when doors might close.
For instance, now is a great time to refinance. Interest rates are low and we can get long-term fixed rate for a term of 10 years with certain lenders. We can also share that information. We want to improve the probability of your investment success.
Investment Success and the 1031 Exchange is from Bob Nelson and Marcia Edwards on the “Real Estate Today” Eugene, Oregon, radio show, which airs at 5:30pm daily on KPNW.