Realtor® to Buyers and Sellers in Encino | Sherman Oaks | Studio City | Van Nuys | Tarzana

1031 Exchange in the San Fernando Valley

1031_Exchange_3Interested in selling your investment property in The San Fernando Valley without paying taxes? A 1031 exchange is for you!

Here are the basics of your 1031 exchange:

For personal property, there are tax exemptions when you sell your home for a profit.  You won’t need to pay taxes on the first $250,000 for individuals or $500,000 for couples.  So, if you and your spouse bought your home for $500,000 in 1975 and you sell it for $1,000,000 today, there’s no tax on that profit.

There’s no such exemption for investment properties.  If you made $500,000 on the property, you’ll need to pay taxes on all of that money, which could be hundreds of thousands of dollars.

Want to avoid paying those hefty taxes?  Try a 1031 exchange!  All you need to do is buy a new property in the same price range to be used as an investment/income property, and you won’t need to pay taxes, because it’ll be almost like you’re exchanging one property for another.

What are the specific criteria for your 1031 exchange in The San Fernando Valley?

  • The new property must be of like-kind to the one you’re selling.  This basically means that if the one you’re selling was an income property, the new one must also produce income.  This “like-kind” term is actually pretty flexible.  You could sell an apartment building and buy a single home that you rent out.  You could sell an office building and buy an apartment building.  You could sell a gas station and buy a beach house to be used as a vacation rental. As long as they both produced income, it’s generally considered “like-kind” (though you should absolutely consult a tax professional and/or 1031 exchange specialist before doing anything).
  • The property you buy must be the same price or higher than the one you sold.  If there’s any profits left to cash out, you’ll be responsible for paying taxes on those (keep in mind that mortgages can come into play here).
  • You must identify the new property within 45 days of selling your previous property.
  • You must close escrow on the new property within 180 days of selling your previous property.
  • The profits from the sale of your previous property must be held by an intermediary – you don’t get to keep that cash in your bank account.
  • You must work with people who know what they’re doing, including a tax adviser, so that you get the proper paperwork in order.

Here’s  a great article covering some of the 1031 exchange basics.

How Ben Vorspan can help

Now that you know a little more about it, what’s the next step?  Contact me!  I can help

  • educate you further on 1031 exchanges in the San Fernando Valley,
  • connect you with specialists and intermediaries (the ones who handle the legal and financial side of the transaction),
  • list your current income property
  • and find the next investment property for you. 

Although I work with a lot of residential clients, I also help many investment groups and commercial clients with standard sales and 1031 exchanges in Encino, Tarzana, Sherman Oaks, Studio City, Van Nuys and other areas of Los Angeles. 

Call me at (310)926-2386 or contact me through this website!

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