1031 exchange rental property exchanged for something with more PASSIVE income?
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Anonymous
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Has anyone done a 1031 exchange of a rental property for something that has more passive income than rentals? If so please share your story and if you recommend it.
I know rentals with a property manager are considered passive-ish income, but these are old rentals that have needed lots of repairs and the usual updates. You have to place a lot of trust in the realtor and his/her people to get it all done properly and I'd like to slowly move toward a less stressful investment. Also please share any regrets or "wish I'd known" information from your 1031 exchange experience. We would use a lawyer who has experience in the area, but just trying to figure out if I am better off just taking the tax hit. These properties have appreciated quite a bit so taxes would be massive if we sold without an exchange. |
Anonymous
| OP again. I will ask a lawyer this as well. From what I understand if you keep the next investment until death, your heirs get the stepped up basis. Could a law change that at any time or would you be grandfathered in due to exchange date? |
Anonymous
This is a good question. I'd not count on anything being "grandfathered" as it will depend on the economic and political situation in our country remaining stable for decades (unless you are in your 90s already). I assume you have a few decades left to live. We cannot predict what's going to happen a few years from now, it's how volatile everything is. I am not talking about anything apocalyptic just gradual changes to various laws, especially at local level. There are many rifts in society that are forcing to revise various taxation practices at local level over time. Revisions to how you can use your property, landlord/tenant laws, estate taxation, etc. So far, the tendency is to against the interests of property owners and towards the interests of the "collective" in some areas. If I were to buy an exchange property I'd avoid these areas and focus on areas where property laws are stronger and are more likely to remain strong. |
Anonymous
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Good quyOP. I am following because I m think about getting rid of my rental properties to. Something more passive.
I want yo consider 1031 for tax , but the reason I am getting rid of these is by I don’t want to manage anything anymore.i want to be as passive as possible |
Anonymous
| I’ve been wondering the same thing, OP. I’d prefer to not take the $100-$200k tax hit on our rental property (due to depreciation clawback) but I’m not earning an adequate return on the property and am sick of managing it. I understand that Delaware Statutory trusts can be used for this. The proceeds have to be received by the trust and I believe it has to go to a single property. Beyond that, I intend to consult a property lawyer before selling. |
Anonymous
What is "as passive as possible" that you are considering? |
Anonymous
The more passive the investment, the lower the returns. Think about how low a return you're willing to accept (T bills?) and work your way back up from there, adding in as much active management as you can stomach. |
Anonymous
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DO NOT invest in a DST or QOZ. If you want out of the managing game, take the tax hit.
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Anonymous
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Your post is a bit incoherent. You either do an exchange for another property and kick the can for taxes or you sell, take the tax hit and do whatever your definition is of “as passive as possible”.
Regardless you need professional help and the ability to do better research online and educate yourself so your questions when you do ask for help make sense. |
Anonymous
I am the pp. Like passive index funds such as voo, vgt vti. Or even just sgov . That’s what I am looking to allocate my money if I were to sell . |