03.06.2002 :: Real Estate News
Tax Strategy and the 1031 Exchange
by Rodney Fitzpatrick

The 1031 exchange process offers some great benefits to persons who want to be flexible and creative with their tax strategy. One does not have to be an expert in this field, just educated enough to recognize the opportunities and the potential. With the real estate market trying to bounce back from a bad economy, might this be the time to exchange for that property that you always wanted by the beach? Perhaps you have seen a great income producing property near your house or heard of one in another town. As it has been said, "You can't keep a good dog down". This is especially true with the real estate market. Someday soon it will blossom back to that great market we were used to a year ago or at least close to it. In fact some investors and real estate professionals have already seen an up trend in the housing market and have started making their moves to be in thick of things.

A word to the wise, "If the tree isn't producing fruit, it may be time to either uproot it and plant it somewhere else or burn it". To our friends in Green Peace; we are not advocating the destruction of trees, but being smart with your property investment. What this means to you is this: If you have investment property that you are dumping money into and can't see a true return on your dollars; maybe it's time to look for something better. Exchange into a property that will increase your rental income to a least 10%. These properties usually can be found in college towns or areas were the housing market is tight. So "uprooting" or placing your investment dollars in another location may benefit you. If this doesn't work for you try looking at a T.I.C. program (Tennant In Common).

These programs allow for you to continue the role of landlord without the hassle. An investor can purchase a percentage of fee simple interest in commercial projects that have nationally known credit tenants, Triple net Leasing, professional management, and double-digit returns. Ownership is totally passive. The owner gets a monthly check just like a CD or Bond. The "return" is very attractive and competitive, no landlording or management is necessary. Most of all that important equity is still intact. Taking this option may result in the taste of some sweet fruit from your labor of love. In this sense your income potential can increase and bring you happier days as an investment property owner. So now that you have your new found strategy, let's do some exchanging!

Remember before embarking upon any new investment strategy; always check with your CPA or Tax Attorney to make sure what is right for you.

Rodney is a Regional Vice President of Investment Advantage Group a provider of 1031 tax deferred exchange services and property tax solutions. As a member of the Federation of Exchange Accommodators Rodney and IAG provide traditional and innovative tax strategies for the investment property owners. You can call toll free at 888-212-1031, e-mail him at rodney@iag1031.com or find him on the web at www.iag1031.com.