If the golden rule of buying real estate is

Location, Location, Location!

 

Then the golden rule of selling real estate has got to be

Tax Planning, Tax Planning, Tax Planning!

 

Okay, so what can you do if you are tired of dealing with tenants and toilets? Everyone knows the real estate market is slowing down. Perhaps you've decided that it is time to get out while the getting's good. So, if it's time for you to sell, what are you going to do about your taxes? If you're tired of managing properties then a common 1031 exchange is not going to do you any good; however, there are other ways…

 

You might want to consider:

 

1031 exchange into a tenant in common property (TIC).  Let someone else professionally manage the property. You still get an income, you still get any appreciation that may occur, and best of all you can make this move tax free!

 

Traditional installment sale. A traditional installment sale is an easily understood method of deferring out taxes over a period of time.  In essence, the seller of a property becomes the lender for the new buyer and receives the amortized payments due on the note.  Taxes are deferred until the payments are received.  Generally, this allows the payment of taxes to be spread over a long period of time.

 

Structured installment sale. This is a new way to defer taxes when selling real estate. By doing a structured installment sale you get a stream of income, and are still able to defer the taxes until some future date.

 

Charitable remainder trust. A Charitable remainder trust (CRT) is an effective way for a person with philanthropic desires to sell an appreciated asset without paying taxes and receive a stream of payments over one's lifetime.

 

Private annuity trust. Private annuity trusts are NO LONGER allowed for tax deferral on the sale of appreciated assets. Do not consider a private annuity trust without discussing it with an attorney.

 

Combining strategies. There are a variety of ways to combine different strategies to create the right mix for your needs.  For example, you might want to combine a 1031 exchange with an installment sale to buy a smaller property and still defer the taxes from that portion not exchanged. Likewise, you might want to combine a TIC with a structured installment sale or a CRT. The point is, there are many ways to combine the strategies to find the right mix for your needs.

 

If you think you might be ready to sell, call us! We can sell your property and show you how to best use the tax strategies above. We will even give you a copy of Richard's most recent book.