Business
1031 Exchange is a strategy that allows an investor to defer capital gains from the sale of one real estate investment property and to re-invest in the next investment property. When 1031 Exchange was first written into the IRS code, closing had to be simultaneous, but now investors have 45 days to identify and 180 days to close on the exchange property. In this episode, Tom Bottenberg talks about the history of 1031 exchange, how it works, and gives an in-depth explanation of the rules; for example, what qualifies as an "investment property", what are the rules on identifying properties, how strict the timelines are, does it have to be an arms length transaction, etc. In a nutshell, to defer all capital gains: 1. The new property must be equal or greater than the sales property's price 2. Move all equity from sales property to the new one 3. Get new debt Tom also talks about creative uses of 1031 exchange, such as exchanging multiple properties into one, or one into multiple. Since the timeline is most investors' biggest limitation, there are other strategies like reverse 1031 exchange, where the exchange property is secured first. Tom, IPX1031 Northern California Manager, has been actively involved within the 1031 Exchange industry for almost 30 years. Starting with a tax law firm in Oakland, California, Tom developed a continuing education curriculum for real estate brokers and routinely spoke to 6-8,000 brokers and investors monthly. In 1994, he co-founded a new nationwide facilitation entity which leveraged thousands of lawyer relationships throughout the east coast as well as creating the 1031 industry’s first widely accepted customer facing web presence and processing platform. Then in 2016, Tom assisted with the development of the first 1031 broker and investor app which integrated property and tax analytical tools, exchange oriented diligence and instant customer interaction. He has completed in excess of 40,000 1031 Exchanges