So one of the secrets to real estate investment is a little-known trick (outside real estate) known as the “1031 exchange,” allowing you to defer all your capital gains taxes on your recent real estate score.
“Surprisingly, many investors are not aware of this,” EVP of Madison 1031 Michael Brady told me back in 2015.
(This is when I first got introduced to it.)
“Even real estate lawyers are asking us about it,” he said.
These exchanges are named after section §1031 of the Internal Revenue Code. By taking advantage of this loophole, investors can reap big breaks on appreciated real estate assets.
“Astute investors use 1031 exchanges to diversify their portfolios, exchanging one high priced property for several smaller properties,” Brady told me, “or investing their money in regions where bargains are easier to find.”
Use of these exchanges has been increasing among professional real estate buyers. According to an early 2014 report (yes, it’s old) by universal REIT authority NAREIT, the overall 1031 exchange activity level among REITs was up.
In fact, one REIT back then did around $85 billion in 1031 transactions. Mind you, that’s a professional real estate operator that knows every trick in the book.
How they do it…
Here’s how the 1031 works in practice:
You sell a property at a profit. Within 45 days, you find one or more replacement properties — worth the same or more — that you want to defer the money to.
From there, the taxes from the profits made from the first property can be “deferred” and used for your next real estate deal.
Internet influencer Grant Cardone breaks it down here. According to himself, he says he’s never “paid any taxes.” (With the 1031, that is.)
Here’s the cool thing: This process can be repeated as much as you want, as many times as you want, until you either die, or decide you don’t want to invest anymore.
So there you have it, you too could avoid paying taxes, billionaire-style!
Senator Sharif Street and Temple University are bringing community wealth-building to North Philadelphia with a big conference.
Co-hosted by fintech NYCE, the Senator’s office announced its inaugural WealthCon event July 23, 2022, at Temple University’s main campus.
Closing the racial wealth gap is a major challenge we face in creating a fair and inclusive society,” said Street, who represents the Third Senatorial District of Philadelphia, one of the poorest communities in America, “Investing in people is how we elevate communities with a history of divestment and educating folks on financial literacy is a critical step toward that goal.”
WealthCon is a community-first experience dedicated to providing direct access to wealth-building programs across Pennsylvania.“
We’re a big advocate of NYCE’s mission of wealth equality and are excited to help address some of the grave issues that have impacted the communities for decades,” Street said.
More than 1000 Pennsylvanians, including officials from state, local, and federal governments, will attend WealthCon, including leaders in housing, lending, education, and community development.
The conference will offer panels and keynote conversations, covering the latest opportunities in real estate investing, financial literacy (including stocks, NFTs, cryptocurrency), retirement planning, public safety, entrepreneurship, and more.
“Financial literacy is critical to long-term community building,” NYCE CEO Philip Michael said. “We’re excited to make that available to everyone.”
The evening will conclude with cocktails and networking at the invite-only VIP dinner honoring WealthCon’s Innovators of 2022.
Innovators are recognized for their commitment to closing the wealth gap in America, both within their communities and beyond. (To submit your candidate for this year’s Innovators Award, please email email@example.com.)
Tickets are free for members of the community. All ages are welcome.
Whether it’s vetting, buying or managing real estate, NOI—short for Net Operating Income—is arguably the most crucial metric for real estate investors. NOI is simply your net profits from rental income, after your expenses are paid. Here’s why it matters and why it’s more important than you think.
Your bottom line
When you have a rental property, your end game is to make a profit. You get your rental income. Deduct your operating expenses like maintenance, repairs and so on. Now you have your net operating income, which is your bottom line.
NOI = all revenue from the property – all operating expenses
It’s a simple enough formula, but there are ways you can manage it.
In business, there are two ways to increase profits. 1) Increase revenue. 2) Decrease expenses.
Simple enough, right? With rental income, there’s only so much you can do to increase revenue. So managing your OPEX is abasic but extremely important metric to monitor — and very often the hack for value-add investors to unlock crazy profits.
Here’s the real beauty of NOI. Unlike single-family properties, the value of income-producing real estate (using the cap rate formula) is derived directly from the net income you can squeeze from it. Not supply and demand. Not the market. Not the S&P. Not bubbles. None of that.