Are You Tired of Tenants, Toilets, and Trash?

Wouldn't you rather go to Tahiti? Are you a landlord with rental property whose value has significantly appreciated? Are you ready to cash in those profits and take that trip to Tahiti?

Before selling your property, check with your accountant whowill tell you that you will be paying $60,000 in CapitalGains Tax to Uncle Sam. Your accountant will also tell youthat adding another $20,000 to your income by that sale iscalled recaptured depreciation. This will bump you into thenext tax bracket and doom you next April 15th into sendingthe IRS a check for maybe another $7,000.

Are you still ready to sell that property?It looks like that trip to Tahiti is going to be sometime inthe far future?

But wait! You decide to check with your realtor and thenfind out about a 1031 exchange to defer your Capital Gains. Your realtor tells you if you buy another like-kind rentalproperty of equal or greater value, you won't get hit withthe gains tax on the sale. That is all fine and good, butit does not really get you out of the headaches associatedwith collecting rent, keeping your unit occupied, findingclean/classy tenants that won't trash the place, nor does itkeep you from getting that 2am call to fix an overflowingtoilet. To top this off, now you have to pay more inproperty taxes and must charge higher rent.

Hmm?maybe this idea is not the ticket to that South Pacificparadise either.

This is the dilemma I heard from my financial clients againand again. They were frustrated and felt trapped in theircurrent situation. So what is a frustrated income propertyowner to do? After a lot of research and roadblocks, I foundthe perfect solution that has changed the lives of myclients and took away stress to bring enjoyment of life.

For anyone who is tired of being a landlord and who owns arental/commercial property that has gone up a lot in value,take heart.A 1031 exchange into a Tenant In Common Property may be youranswer.

There are very specific rules to follow set by the IRS, andthe entire detailed process is the subject for a futurearticle, but here's the gist:

1-Sell your current incomeproperty;

2-Before the close of escrow, you declare via a QualifiedIntermediary (also called an Accommodator, who is aqualified third party) that you intend to do a 1031 exchangeinto a Tenant in Common Property;

3-Work with a reputablecompany to identify a property that you would like topurchase an interest in;

4-At the close of escrow, yourproceeds are transferred by the Accommodator to purchaseyour proportionate share of a larger "A" rated commercialbuilding;

5-You may choose a business center, a medicaloffice building, or similar high-end property; and lastly,

6-You get a deeded interest in this property, so you cankeep it, resell it, pass it to your heirs, or even gift itto charity upon your death.

The way that this works is all the new fractional owners, or"Tenants in Common" hire an ace Management Company to handleall the property management tasks. The company finds andkeeps high quality tenants, does the maintenance andupgrades, pays the property taxes, and handles all the dayto day crisis that arise. Probably the three most importantfactors in this entire process are:

1-Your choice of companythat offers the properties for sale;

2-the Accommodator,and;

3-the management company.

Make sure each of the three parts is a top notch with proventrack records. Anything less could spell disaster.

When this 1031 option is done properly, your benefits willbe:

Deferral of all Capital Gains,
A monthly contractual income (usually based on 6-7% returnon equity),
Building depreciation for tax savings,
Unlimited property appreciation potential, and
No more headaches of property management.

Good-bye Tenants, Trash and Toilets!Hello Tahiti!

Paula Straub is a Financial Advisor, Insurance Agent andMortgage Loan Originator in San Diego, CA. As a successfulbusiness owner, Paula strives to guide clients to financialindependence in the most timely and efficient mannerpossible.

(c)Paula Straub - All Rights reserved

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