Optimizing the 1031 Exchange, with Dave Foster

Our guest today is Dave Foster, a 1031 exchange expert and real estate investor. In this episode, we dig deep into how to take advantage of the 1031 exchange to defer your taxes, expand your investment portfolio, and make your tax dollars work for your benefit. If you want to learn about 1031 exchanges and how to use it in different REI lifecycles, then this episode is for you! Learn more about Dave and his journey at reiclarity.com!

“As you move forward, you start to learn what you know, but you also start to learn what you don’t know.”

02:17

Dave always wanted financial freedom for him and his family. His goal was to buy a sailboat one day and live in it with his family. He started real estate investing in 1996 by purchasing a duplex, fixing it up and selling it. However, when he discovered how much he owed in taxes, Dave realized he needed to find a better way to invest. 

He heard about the 1031 exchange that had just become usable for regular investors at that time. The 1031 exchange allows an investor to “defer” paying capital gains taxes on an investment property when it is sold, as long as another property is purchased with the profit gained by the sale of the first property.

Dave became a 1031 expert and 10 years later, he was able to buy a sailboat and live in it for 10 years.

“The 1031 exchange is always going to start with the sale of a piece of property.”

08:37

Dave is a qualified intermediary for 1031 exchanges. The IRS requires that investors who take advantage of a 1031 must also use services of an independent, unrelated third party like Dave. 

Dave’s 3 crucial questions for investors to consider when contemplating using the 1031 exchange are:

  • What are the consequences of it?
  • What’s the cost-benefit of it?
  • Do I need it?

According to Dave, if you are planning to buy another property after selling the current one, then a 1031 could be a good option. However, it is essential to know that the depreciation taxes are accumulating, and although they indefinitely differed, they never go away. The 2 ways to never pay back the taxes are to keep buying and selling more properties or to pass away.

The type of real estate doesn’t matter, so if someone is at the end of their investing cycle, they can still get into multifamily investing or syndications that require less management.

30:55

Dave’s REI advice for investors who are thinking about their next steps in selling:

  • You need to hold the right property and rent it for the right amount, so the market balances out what you paid for it.
  • You need to have a good accountant on board to always be up to date with tax changes.

Mentioned in the show:

  1. www.the1031investor.com
  2. www.shineinsurance.com/reiclarity

Learn how to grow your portfolio and reach incredible success the right way! Visit us here for everything you need to know: www.shineinsurance.com/reiclarity

Special thanks to Dave Foster for taking the time to share so many great insights with us

 
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