A.D. Cantelmo Property Management
Our Business is Property Management in Orange County California
You should think twice about selling that Condo
I talk to people all the time about selling their homes, because they
want a larger place and many times they are living in a small one or two
bedroom condo. I try and talk them into keeping the Condo and joining the wonderful
world of investors who make money in renting their properties. Now, it is a
strange position for me to take, because I make more money if they sell then if
I manage their rental property, but I hate for people to lose opportunity to
make long term money.
Now the important part is whether these Condo Owners can keep their
Condo and still buy a new home. That will be for them to decide, but if it is
something that they can work out, it is a great way to grow their wealth tax
free.
Let’s look at it from a growth point of view and in my business of
Property Management in Anaheim Ca. I have clients who do this all the time.
First, the Condo owner keeps their Condo, and is able to finance a new
home. They rent out the Condo for a couple of years and find that they like the
Rental business. They want to grow the business and purchase another property.
They decide that they want a multi-family investment property, so they need to
sell the condo to buy the new property. If they sell the Condo out right and
take their profits and buy a new property, they will be hit with taxes on the
profit. So I explain to them, that they need to do a 1031 Exchange.
How this works is that you sell the Condo, using an Exchange Company
and never actually take possession of the money. In this example, lets say they find a duplex they want to purchase. The proceeds from the sale of the condo goes to
the exchange company and then the money from the exchange company goes into the buying the Duplex, this way no taxes are paid and the former Condo owner has just doubled their rental units .
You just increased your investment and your potential for income tax
free.
You can continue to do this and continue to increase your rental business
tax free as long as you never actually take possession of the money and always
do a 1031 exchange.
I tell people all the time that this is one of the best ways to grow
rich in Real Estate and not pay any taxes while you grow. A 1031 Exchange is
not a complicated transaction. You just need to follow the rules.
If you are thinking about doing a 1031 Exchange, always consult your tax consultant to make sure it works for your situation.
A.D. Cantelmo Property Management Specializes in Property
Management in Orange County Ca.