Welcome Home with Monique

Kevin Krall 0:00
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Unknown Speaker 0:25
Good morning. This is Monique Buchanan, the host of the welcome home with Monique show. And on this show, I talk all things real estate. Listen, I want to thank you for tuning in. Well, happy Saturday, everybody. This is Monique Buchanan, the host of the welcome home with Monique show. Just want to say aren't you enjoying this cloudy weather? You know, I am. You guys know I'm originally from Seattle. So I almost feel like I'm back at my first home. But you know, this is home now. So anyways, I've got a great show for you guys. Listen, if you are an investor, or if you own rental properties that makes you an investor, by the way. And I've got a beautiful young lady on today. And that is what her business is, is to tell you how to avoid those capital gains tax. Right. So I want to welcome Miss Erica. And I hope I say this right now rather for did I say right, Erica?

Unknown Speaker 1:15
You did? Correct? Yeah,

Unknown Speaker 1:18
I'm pretty good at that. So you guys, Eric is on today to kind of go over, you know what it looks like to do what you've probably heard of which is a 1031. Exchange. There's quite a few of my listeners out there that have been reaching out to me about selling their properties. A lot of them are investment properties. Some of them are their own properties. But this is always good to know. Right, Eric,

Unknown Speaker 1:41
it is. Thanks for having me money. Thank you, it is a great way to help people defer capital gains taxes for a 1031 exchange,

Unknown Speaker 1:50
which means touching, save some money. Or actually, it's a deferment. So it's not really Yeah, kind of just putting that off

Unknown Speaker 1:59
there, you're kind of kicking the bucket down the road, so to speak. Gotcha. But there is another tax law called the 121, section 121 That is actually used for personal residences. And it's an exclusion of taxes, which is actually better than a 1031. So if you're selling your personal residence, and you've lived in it two out of the last five years from the sale date, then you qualify for Section 121. For personal residences, if your spouse single, it's $250,000. Exclusion. If you file taxes, married filing jointly, then it's a $500,000 tax exclusion.

Unknown Speaker 2:36
And see, that's the one that I'm familiar with, because I sell a lot of residential property. So basically, like she said, in what she also says is that it does not have to be consecutive. So as long as you live two years, but it does not have to be consecutive, then you could possibly qualify for the 121. Correct. And a single person, if they own a property, and they make 250,000 in equity, they can walk away without having to worry, but if they make 2000 or $250,001, they need to, you know, look into that 121. Right. Yes. Right on. So let's talk about the 1031. Because, you know, a lot of people don't realize it's not the same as a 121. What makes it different.

Unknown Speaker 3:16
So the 1031 exchange is only for investment property. So if you have long term rentals, short term rentals that you're planning to sell, the IRS is going to want a piece of that profit. So you will have to pay capital gains taxes on them.

Unknown Speaker 3:32
Right. Right. Okay. And this is so this law allows you to, like you said, kind of defer it or even roll it over into another property, correct? Yes. How does that work? So

Unknown Speaker 3:42
with a 1031 exchange, you sell your investment property, then you take those sales proceeds and roll them into a new replacement property that is also going to be rental or used in a trade or business. Okay, so

Unknown Speaker 3:55
here's where it gets a little hairy. Everybody's always confused on when they say it has to be a like property. Can you kind of break that down to what that actually means?

Unknown Speaker 4:05
So like chi property actually means any real property. So sometimes I get calls from agents or clients saying, Hey, I'm selling a single family residential home, do I have to buy a single family residential home since it says it's like kind they take that so literally, right. And like kind for purposes of 1031 Exchange is any real property so you can sell a single family residential and buy four unit multifamily home you can even commercial I believe is even commercial. Yeah, so you can sell commercial. I had a client not too long ago, he sold a commercial property. And he sold a commercial property that was roughly when I say about $7 million, and he bought 30, residential, single family residential homes because he was just tired of being in the commercial market, right or vice versa. Correct. It goes by both ways. You know, some people are tired of being the residential market, they want to go to commercial and 1031 Exchange works for both of those. And as well as vacant land, or oil and gas rights. We have these things called DSTS Delaware statutory trust. It's a broad definition. When you say like chi,

Unknown Speaker 5:19
so that's crazy. So they could sell property and buy gas rights career in New York air, right? That is correct. That is crazy. So I hope that helps you guys listening out there. If you have property that is an investment, rental properties, or whatever that may be, and you've been thinking about, you know, selling those properties, and you're worried about having that capital gains tax hit you. This is Miss Erica, and she is Miss Erica referred Rutherford CMMS. And she can assist you and if you want to get more information on that, you can always reach out to me 702984 3700 702984 3700 This is Monique Buchanan with the welcome home with Monique show. And that is what we were speaking on if you're just tuning in 1031 exchanges. Okay, so back at it. One more question. Can anybody get the 1031? Does it? Is anybody excluded from that any kind of investors? Or can everybody well,

Unknown Speaker 6:15
the IRS particularly doesn't like flippers doing 1031 exchanges or developers they like for investors who intend to hold properties long term or hold the property for business use again long term. So if you're a flipper, which are very familiar in the real estate market, you know some people it depends on what type of investor you are. Some people hold long term some people like to flip get in get out as soon as possible. But flippers No, that's a no and developers are now for 1031 exchanges.

Unknown Speaker 6:50
What is long term for maybe somebody that's listening that does flip homes, you know, go in there, make them beautiful, and then wants to turn around and sell them? What is long term what they have to hold it for a year with? They have to hold it for three months, six months? What does that look like for that person long

Unknown Speaker 7:03
term per the tax code is a year and a day. Okay, so

Unknown Speaker 7:06
urine a day. So maybe the flip brand long? Which does happen, especially with the shortage right now, right on supply? So if they're already hitting 11 months,

Unknown Speaker 7:17
yeah, it's all about intent with the tax code. The tax code is very specific about that. So if your intent was to flip it out the gate, your your that's not going to work. But if your intent is to hold it, you know, if you're fixing it up, and then you intend to hold it for investment, which would mean you're putting out ads saying hey, this property is for lease and things of that nature. And yes, or having you put it on the MLS, as you know, up in New coming home, and all of that works. So if you get audited, then you have all of those things in place to back you up, but you're always in debt. Was there?

Unknown Speaker 7:53
Okay, okay, well, I guess that's not no. Okay. So here's one more for you real quick.

Unknown Speaker 8:01
What if I can't find a property? What if the, there's just nothing that I can find? Because isn't there a timeline? What is that timeline

Unknown Speaker 8:08
there is so everyone gets the timelines confused, I hear 90 days a year or they get confused with capital gains tax, the timeline for a 1031 exchange, it's 180 days total. So the first 45 days is the identification period, you have to let us know what you intend to purchase within the first 45 days of the exchange. And that clock will start to tick upon Close of Escrow at the property you're selling. So if you close today, tomorrow will be day one. Okay? I mean, you have the first 45 days to identify Now, if for some reason, because the last two years, inventory has been a little short. So a lot of our clients were a little hesitant, wondering if they would be able to complete in a day, right? Because inventory, but I understand is loosening up a bit now. Yeah, that's good to hear. We

Unknown Speaker 8:57
went from 1900 to 8000 homes. Oh, that's good. That's

Unknown Speaker 9:01
good. But for 1031 purposes, you have to identify the what you intend to purchase within the first 45.

Unknown Speaker 9:10
So not, not show specific property. Just identify what you want to buy. Is that correct?

Unknown Speaker 9:17
Correct. And we'll provide you with a form in order to do that. But to answer your question, if you're unable to find something, we will hold your funds for the first 45 days and then after the 45th day, you can say hey, I'm not gonna identify anything, your funds are returned to you and then you're just pay taxes on them as normal.

Unknown Speaker 9:36
Okay, so when you sell the property, you you guys will hold on and by the way, she is an intermediary.

Unknown Speaker 9:41
Yeah, a Qualified Intermediary is what my company does first American exchange and in order to do a delayed exchange, you have to have the services of a Qualified Intermediary.

Unknown Speaker 9:51
So that would be your first step if you are interested in doing a 1031 exchange is Miss Erica.

Unknown Speaker 9:55
Yes, because our documents have to be in place prior to the close of the property. You're relinquishing

Unknown Speaker 10:00
the property you're selling. And you've been in the business a long time, haven't you, Erica?

Unknown Speaker 10:04
I have I've been doing this almost 10 years, I love my job. I have a background in real estate. I'm an investor myself, I have some homes back East. So it and I have a tax office. So this kind of brings those two things together for me,

Unknown Speaker 10:18
right. So just so you guys know, Miss Erica was teaching me myself a 1031 exchange class. And I said, Oh, my goodness, you're so knowledgeable, I'd like for you to come on my show. And you know, let my listeners also get that great knowledge that you're passing along about the 1031. Because there is a lot of, you know, misconceptions about it. And so it's good to have it straightened out.

Unknown Speaker 10:39
That is true. That is true. I hear everything. I have agents calling me all the time. And it's always best if you know, at least the basics. That way you can give your clients the basic rules and information. And then if they need more guidance, guidance, they can come to me.

Unknown Speaker 10:58
Right, right, right. We're all about that referral. So let's jump right back into it real quick, what taxes are deferred. So the

Unknown Speaker 11:06
capital gains taxes are deferred. In Nevada, we don't have any state taxes, but normally, most states will follow the federal tax code. So you have federal taxes that are deferred. And I don't know if people know when you when you have investment property and you report that on your tax return, you also have to depreciate that property. Well, you don't have to, but depreciation also comes into play. And then when you go to sell investment property, the IRS says you need to recapture that depreciation. So they've been giving you this as a credit over the years, you depreciate rental property, a straight line method, 27.5 years. So if you've had it for like three or four years, you've been getting this credit, but when you go to sell, they say, Okay, you need to recapture that depreciation, and we're going to tax it at 25%. Oh,

Unknown Speaker 11:54
wow. And a lot of the sellers have no clue about the depreciation. That is true unless they're listening to the show.

Unknown Speaker 12:00
Exactly. Yeah, you have some people who want to do their own taxes may not have taken the depreciation, which is why is always a good I tell investors all the time, there's two people you can have in your toolbox that does great. One is a great agent. And the other one is a great tax person, whether CPA Tax Advisor, that is going to do the work to try and find these tax deductions for you. I had a client, a friend, actually who was doing his own taxes, he completely missed a depreciation. Credit that he could have been taken, but the IRS says even if you didn't take it over the years you could have so they're still gonna make you pay. Oh, wow. Yes, that's

Unknown Speaker 12:38
crazy. Yes, yeah, that's really good information. And good to know. So

Unknown Speaker 12:42
all of those things get deferred in a tax exchange. So you have the capital gains tax, you have the depreciation recapture in any state taxes that may be involved. And there's also a net income investment tax, if you make over a certain amount of money. 250,000, I believe for married filing jointly and you have rental income.

Unknown Speaker 13:03
Okay, so this comes into play even with a 1031 exchange, because I know what the 121 it's the 250 per single 500,000 in equity for a couple. But you're saying even with a 1031. There's a net

Unknown Speaker 13:15
investment income tax that you pay that will be deferred if you do a 1031 exchange. So most people think when they think 1031 Exchange, it's just capital gains taxes that are going to be deferred, right. But there's quite a few other taxes that come along with that deferment as well.

Unknown Speaker 13:30
Oh, that's so good to know. Yeah. Yeah. You think it's just a capital gains tax, so you're actually avoiding quite a few other taxes? That

Unknown Speaker 13:37
is true, you're saving a bunch of money to do and when you do an exchange? Well, that

Unknown Speaker 13:41
is just wonderful information. Because I know a lot of my listeners are out there listening, and quite a few of them are investors, and they do own you know, properties, right? And maybe they were thinking, Oh, my goodness, I thought when I did a 1031 exchange, I would have to keep dealing with the tenants and toilets. Right? Right. Right. But now they know, hey, I can move all the way out of this arena, and get into commercial, you know, or rent and that that is awesome. So is there any other things that they should maybe know about that about that move?

Unknown Speaker 14:15
Well, it's fairly simple. You have to have a great agent that's going to help you find property. Yes. So if you go from single family, residential to commercial, I have a lot of clients who are older, they're tired of the tenants trash. Yeah, the three T's were the toilet. They're tired of that. So they decide to sell off their rental properties and exchange them into a Delaware statutory Trust, which is similar to a real estate investment trust, and they get some of them pay dividends and they manage all of that for you. So they buy properties, a lot of times near college campuses, or they build senior homes. And I have Yeah, I have some clients that go from being landlords to just in invest in their bonds. And yes, they exchange right into these DSTS. And then they're just can lay back and enjoy their retirement

Unknown Speaker 15:07
and all that is done through you, or how would they get into the DST?

Unknown Speaker 15:10
Yeah, the DST is something separate we we do have some that, you know, we don't endorse any one DST want to use, you know, like with any investment portfolio, you need to do your due diligence and read the prospectus and things of that nature. But we do recommend some that we deal with on a regular basis. And we tell our clients to do their due diligence, of course,

Unknown Speaker 15:30
of course, but you do have some referrals of the DSP Correct? Yeah, not Yeah,

Unknown Speaker 15:34
I'm happy to give them a list of people we deal with.

Unknown Speaker 15:38
Right on. Yeah, because I'll be honest with you before I took your class, I wasn't aware of the DSPS. So that was really good information. Yeah. No, I've dealt quite a few times with many a client that has we've done 1031 exchanges. I had a client come from LA, I think I was telling you that story. One of my clients sold a condo downtown LA, he was able to walk away, or they were able to walk away with 700,000. And we did the 10 331 exchange, you guys totally jump in, take over deal with the title companies direct. I didn't have to do you know a whole lot. All I had to do was pair my client up with, like you said, a Qualified Intermediary intermediary? Yes. And they took over. So we did locate the property, I believe it was what was it 45 days, like you said to, for them to let them know. And then we had 180 days that we need to be closed comm

Unknown Speaker 16:32
Yeah, it has to be completely completed within 180 timeline. Those are very strict timelines, there are no extensions, you must be done with your identification of 45 days and exchange itself within that 180 day timeline. So guess what, if your 100 and 80th Day falls on Christmas Day, you better close on that property on Christmas Eve, or if your 45th day falls on a Saturday, those counts. So weekends and is calendar day. So weekends or holidays do count.

Unknown Speaker 17:02
But you did say that natural disasters

Unknown Speaker 17:06
there's a present sometimes if the president declares a natural disaster, they'll give up like literally the only time they'll give that is literally the only time they'll give it an extension.

Unknown Speaker 17:14
If you guys are just tuning in this morning, you can and I'm talking to the lovely Erica Rutherford, I said it right. She is my 1031 Exchange specialist. And she's just going over the guidelines, trying to help all my listeners understand, you know exactly what a 1031 exchange is, what it looks like, and how it can benefit you. So real quick, my website is www welcome home with money.com. My YouTube channel, you can check it out. It's also welcome home with Monique, and it is there and ready for you to like and subscribe. I was gonna say describe subscribers better. So real quick, guys, let's jump right back into this. Eric, I've got one more question for you. Are they able to pick multiple properties? Or do they have to just pick one property when they're trying to figure out?

Unknown Speaker 18:02
Well, the key to having a successful exchange? But to answer your question, yes, the key to a successful exchange is you need to purchase property that is equal or greater in value than what you sold. So if you sold a property for a half a million dollars, then you can buy one property or multiple properties, that their combined value is also a half a million dollars. And that way you fully defer taxes. The other thing you need to do is you need to spend all of the sales proceeds. So yeah. Well, yeah, if you have, if something is taxable in my industry, we call it boot. So if you don't spend all the sales proceeds, and for any reason we have to return funds to you, then they're considered boot and taxable. So you really don't want that to happen. And we do our best to help you exhaust all of the 1031 funds.

Unknown Speaker 18:54
Well, you can do the Delaware thing to get rid of a boot. Right? That's where you can you can that's

Unknown Speaker 18:59
one example I'll have somebody say if you sell for maybe $600,000, you buy a property that's $580,000, you have 20,000 in boot, maybe you want to invest that in a Delaware statutory trust that way you have a fully deferred exchange.

Unknown Speaker 19:13
Okay, great, because we want to avoid that boot. That is correct. Right. So thank you. So let's just do a quick rundown or quick rundown of the timeline. What a 1031 exchange is, what it means when it says real property and who can't do it and who can't.

Unknown Speaker 19:29
Okay, all right. So 231 exchanges for investment property. The timeline to complete an exchange is 180 days with the first 45 days being the identification period. The IRS does not like flippers or developers doing 1031 exchanges. So it must be property that you intend to hold for investment or using a trade or business. And you must have a Qualified Intermediary in order to complete a delayed exchange. So if you need if you would like to do an exchange. I am here to help you. My name is Erica Rutherford. I'm with first American exchange company. And my phone number is 702-672-3058.

Unknown Speaker 20:12
And if you miss that you can always you can always reach out to me 702984 3700 Welcome home with monique.com we had Miss Erica Rutherford on the show today who just enlightened us to what it means to complete a 1031 exchange. Thank you so much for coming on. Erica,

Unknown Speaker 20:31
thank you so much for having me. It's been a pleasure. Absolutely. Thank

Unknown Speaker 20:34
you, girl. Okay. Okay, guys, so let's jump on back into my portion. But wasn't that great, you guys, it's always good to you know, just know what's out there that can help you to avoid those taxes. Right? So I'm so thankful for Miss Erica coming on and letting us know just how we can get around that. All right, let's jump into my weekly listings. Listen, the property over in Santana Hills is still available. And guess what guys? I've got great news for you. It is downpayment assistance approved it is also lease to own approved okay, it's going for just under $485,000 It's a four bedroom corner lot property. All right, sellers are actually going to give you $7,000 towards your closing costs. So if you're a little shy in the closing costs area Hey, no fears. You know. So real quick four bedroom corner lot Strip views from your bedroom, and the seller is contributing towards your closing costs. If you are interested, you can text 702984 3700 The word beautiful flower no spaces. You can see pictures of the property. All right now my MacDonald ranch listing. All right. This is also a corner home four bedroom located in the Henderson area of McDonald ranch. It has two suites you guys so not only the primary suite has a full bathroom. But there is a secondary with a pool bathroom single story with an office and I'm telling you guys this is you know you don't want to miss it. So corner lot single story. McDonald ranch Henderson area, four bedrooms gated community. Listen 702 94 3700 You can text Ashley rose, no spaces, Ashley rose, no spaces and get a preview of that property. And remind you all of these properties are also on my YouTube channel. Welcome home with Monique along with quite a few of my previous shows. So if you've missed something, you can always catch it there. Also, I'm on Apple, podcasts, Spotify, you name it. Your girl Monique is all over the place. Trying to share this information with you guys. Okay, last thing, these downpayment assistant programs are back in full force. Okay, so you only need a 600 credit score two years on the job and that does not have to be the exact same job. Just the same like job. Okay, so if you were a carpenter and decided that you wanted to start being a bartender, then yeah, the clock starts over. But you know, if you were in the service industry and went to another position as a service industry, you are good 600 credit score, it's going to give you an A some assistance on your downpayment, as well as up to half of your closing cost. There's also the lease to own program. So all of these things are around to assist you in becoming a home owner. If you're interested in the lease to own you can also text 702984 3700 lease to own all right all the way spelled out no spaces. If you are interested in the downpayment assistance, you can text DP a 2702984 3700. Now listen, if you're just moving or deciding to move out of town, I should say I have a referral network. If you are looking for an agent in anywhere of the 50 states really weren't 18 countries but anywhere in the 50 states. I've got you covered you can text refer to 702984 3700. Please make sure to put what city and state you are moving to. If you're just moving here to Las Vegas. I have a team of over five agents and we would love to assist. My number is 702984 3700. You can find homes and start searching automatically at welcome home with monique.com. That's www. Welcome home with monique.com. If you want to just kind of get to know me, you can Google me which sounds so cliche but you can welcome home with Monique or Monique Buchanan. Love to hear from you and can't wait to hear from you soon. All right, have a blessed weekend. Thank you for listening. This is Monique Buchanan and my license number is S 1788 46 and I am part of EXP Realty Tune in next week.

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