In an exclusive interview with Nathan Strager, Vice President of IPX 1031, Sarah Remley discusses the importance of the 1031 exchange. The exchange allows an investor to reinvest all of their equity when they sell a piece of investment property and invest in another piece of investment property. This can add a lot of power to transactions and the majority of the taxation can be deferred. Remley explains that leveraging equity over and over again is the essence of building wealth, allowing investors to diversify their investments and reinvest their equity.
Remley is passionate about the 1031 exchange because it can save investors tens of thousands of dollars and is cost-effective. She cautions that selling a rental property can result in layers of taxation, including capital gains tax, depreciation recapture, state tax, and net investment income tax.
Strager asks Remley whether a residential property can be sold, and a 1031 exchange used to invest in other types of real estate, such as commercial, land, or construction loans. Remley replies that the term "like kind" in the industry refers to all real property, and the definition is broad enough to allow investment in any type of real property, including single-family residential, land, and commercial property.
In addition, Remley emphasizes that the 1031 exchange can be a powerful tool for first-time investors or those with one or two rental properties to explore different options to pull different revenue. Many millionaires use the 1031 exchange to reinvest their equity.
In completion of the said interview, the 1031 exchange is an important tool for investors to reinvest their equity, diversify their investments, and build generational wealth. By deferring taxation on their equity, investors can reinvest their equity over and over, leading to buying power and the ability to leverage their investments. Remley and Strager advise investors to consult with a CPA or tax advisor before making any investment decisions.