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5 Powerful Benefits of a 1031 Exchange Explained - YouTube
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why if 1031 exchange is perhaps the
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number one way to build wealth what is a
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1031 exchange that's today's show let's
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dive into it hey everyone I'm Clayton
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Morris long time real estate investor
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and founder of Morris invest which is a
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turnkey real estate company we've been
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in business for a number of years and
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we've worked with a lot of 1031 exchange
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customers over the years those are the
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individuals that are trading a property
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that's not producing very much cashflow
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and they want to buy a lot of cash
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flowing assets and you can do it
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tax-free so let's go into the benefits
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of a 1031 exchange if you are new to
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this theory if you are new to this tax
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strategy then you're prepared for your
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mind to be blown away and if you're old
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school you've been down the pipe you
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certainly understand a 1031 exchange
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maybe you can take away a few key
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pointers here as well that may help the
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advanced person who's watching this as
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well all right I'm gonna go through five
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key areas of what makes a 1031 exchange
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so incredibly powerful all right
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tip number one on this list of course is
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the tax benefits the deferring of all of
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your taxes because you're rolling one
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asset into another so you're not gonna
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pay taxes on the benefits and this the
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profit of the sale of this property we
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worked with a client recently who had to
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sell a couple of Nevada properties they
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were underperforming when I spoke to him
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on the phone I said I said I got to ask
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you he was a doctor I said what is your
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what is your return on investment on
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these properties and he said not not as
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good as yours he said they are not good
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you know he spent most of his time in
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the hospital working he didn't have time
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to really watch and figure out how to
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make sure that his portfolio was cash
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flowing so he had these overpriced ass
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overpriced assets okay
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they were rented but they were producing
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such a minimal return on his investment
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that he wanted to move those three or
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four properties that were like three
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hundred thousand dollars in profit he
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wanted to move those into lower-cost
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properties that would produce a much
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higher yield so we helped him do that
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but guess what he didn't pay any taxes
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on it because he set up a 1031 exchange
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he set it up with a 1031 exchange
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provider there's a link below in the
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description of
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a company that we work with on all of
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our 1031 exchanges they do a fantastic
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job
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so you basically call them up you set up
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your 1031 exchange you're done in like a
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day or two it's that simple and then
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when you sell that lower producing
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property it's just the the profits go
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right into that sort of custodial
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account and then you're not touching it
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so you're not touching it and it's not a
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taxable event and then you're rolling
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those profits into these other assets
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it's a killer way to save on your taxes
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the second reason a 1031 exchange is so
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powerful is because it allows you to
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grow your portfolio this is what the
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rich have been doing for so many years
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they'll take the profits of a sale after
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eight years of owning an apartment
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complex or or a number of different
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properties pieces of land it doesn't
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matter and then they're trading up
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they're gonna buy something more they're
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gonna use the profits and roll it into a
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higher producing asset they're gonna
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increase their net worth just by doing
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that
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and again all tax-free so you can also
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diversify your portfolio so maybe you
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decide to sell a commercial building and
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you want to buy in 20 residential rental
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properties you can do that because the
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like and kind you can do that now you
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can't sell comic books and buy real
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estate that doesn't work that way it has
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to be for a like and kind asset but
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that's the power of the 1031 exchange
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number three on this list is something I
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alluded to in in number one which is
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about getting rid of a crappy asset
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let's be honest the reason that we work
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with so many 1031 exchange clients in
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our office is because they're
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transferring out of a low performing low
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cash yield asset into a high performing
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one we had another client just recently
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who had to sell seven properties in
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Minnesota that were not producing
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anything they were way overpriced and
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they were not even rented so he sold
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them at for a profit in the market right
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so he got some appreciation on these
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single-family homes that he had and then
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he was able to roll that profit through
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a 1031 exchange tax-free into a number
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of performing properties that had
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tenants inside so the properties we do
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are usually in the 50 60 70 thousand
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range and the rent is anywhere from 650
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to nine hundred to a thousand dollars a
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month in rent so you do the math
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Trading up a $300,000 property that's
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maybe rented for $1,000 or it was vacant
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now you're rolling that into a higher
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producing higher ROI property again
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tax-free using a 1031 exchange so
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powerful number four on the list is that
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this is a longtail play right this is a
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long game strategy meaning that you can
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keep doing this over and over and over
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again this is what I plan to do and by
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doing a 1031 exchange we're selling off
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some assets now putting them into the
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1031 exchange for profit and then buying
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higher producing ROI properties and then
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I'm gonna do that again and I can do it
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again and again and again until I die
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because step five on this list is being
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able to hand down these properties and
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the profits to my kids
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tax-free you follow me here now remember
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let's go back let's let's say we go back
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like five or six transactions ago okay
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let's say I'm just starting out let me
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paint this picture for you let's say I'm
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the guy in Nevada
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who's got four properties that are
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overpriced and not producing much take
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those four properties I sell them for a
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profit okay I take that profit in a 1031
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exchange and I buy fifteen single family
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rental properties that are cash flowing
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okay maybe I look at three of those
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properties in my portfolio and I say wow
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those are these three haven't really
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appreciated nicely so if I sell them
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I'll make a nice profit great so now
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I've got that chunk of properties I sell
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off three of them in a 1031 exchange
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again okay maybe they've doubled in
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profit I take those three put those in a
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1031 exchange sell them off now use the
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profit from those three to maybe buy
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seven or eight more properties see how
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your portfolio expands and expands and
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expands and then by the time I die
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I've not paid any taxes on those profits
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because I've kept doing 1031 exchanges
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then I hand them down to my children and
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guess what they don't pay any taxes the
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death of the owner doesn't transfer any
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taxes to the children that's an amazing
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way to build legacy wealth that's what
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we talk about here on the channel it's
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building legacy wealth it's building a
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dynasty you want to build a dynasty
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using a 1031 exchange
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is a killer way to do it if you want to
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figure out what your financial freedom
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number is how many rental properties it
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would take for you to be financially
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free we give it away for free it's three
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pages totally free just click on the
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free download right here and you can
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watch how many expenses can be wiped
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away with the cash flow from your rental
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properties thank you so much for
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subscribing and sharing this channel
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with your loved ones I cannot wait to
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read your comments below if you are
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ready to take action and set up a 1031
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exchange we will help you do it until
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next time everyone go out there take
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action become a real estate investor
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believe it's the number one way to build
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wealth we'll see you next time
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