Jon Gerstein

Jon Gerstein


click here for more on 1031 Exchange and IRA

A 1031 Exchange is great and legal way to defer paying capital gains tax on an investment property.  When does a property become an "investment" property?  If you own a property and have not lived in it 2 of the last 5 years, the IRS counts your property as an investment property and is subject to capital gains tax upon sale.  If you have been claiming depreciation on your annual tax returns, the depreciation you have claimed over the years is also subject to the capital gains tax.  This can really add up.  


If you sell your existing property and purchase another investment property of equal or greater value to the relinquished property, all these taxes can be deferred under a 1031 Exchange.  The IRS has set very specific rules on how this can be done.  For more details on how this works, please contact me, and I will guide you through the process.


Investing IRA funds into real property is another wonderful way to build long term wealth, especially for those who are not entirely comfortable investing in the stock market and see the vast opportunities in purchasing investment real estate.  There are also very specific rules that need to be followed so as to avoid being hit with an early withdrawal penalty.  For starters, the transaction must be done through an alternative IRA custodian such as Entrust.  All funds pertaining to the transaction must come from the account established through the custodian, even the initial earnest money check submitted upon your offer on the property.  


I firmly believe that now is an ideal time to be investing in real estate with the rents having increased and the prices having dropped at the levels they have.  There are many deals that can generate an annual return of over 10% from rental income alone while the property appreciates over the long term. A 1031 Exchange can allow a considerably higher return for someone who owns a rental condo and trades up to 2 flat of slightly higher value with nearly double the rental income and a faster rate of appreciation.


If you would like to make an appointment to discuss these options, please call me at 312-285-0539.