Broker Check

Selling Real Estate?

Have plans to sell real estate? Afraid of what you might owe Uncle Sam?  Real estate 1031 exchanges are one way to defer taxes to a later date but continue to reap some of the benefits of owning real property.  People often hesitate to sell appreciated income property, especially rental properties or farmland, because of capital gains taxes. Or, they trade one property for another when the overall goal is income without the hassle of property management and related expenses.

Enter the world of the 1031 Exchange and a DST (Delaware Statutory Trust) program.  

Under the 1031 tax code, owners of appreciated property may exchange “like properties” for other “like properties” and defer capital gains on the sale of the first property for certain periods of time.  There are criteria to be met, such as a time frame for identifying where the proceeds of the sale will go, the type of property it will go into and the way title is held. By using a DST, if all criteria are met, the investor may be able to sell time- consuming rentals or farm land, purchase into a DST and still have income with a deferral of capital gains taxes.  

Some benefits of using a DST include:

  • Diversify real estate holdings by type and geography (ie. Commercial property, Multi-family housing, Storage units)
  • Invest in quality property that might not have been available to you as an individual owner
  • Earn monthly income
  • Eliminate hassles and headaches associated with direct ownership of property

Certain criteria apply and eligibility must be met for programs like these.  Know your options before you sell and to what kind of real estate these programs apply.