Tax-free. Now that I’ve got your attention, Dave Foster, the founder and 1031 Exchange mastermind behind The 1031 Investor, is a pro when it comes to leveraging tax codes to maximize your investments and sell them tax-free. Whether it’s for investment properties or even your primary residence as a real estate professional (in Dave’s case, a boat for 10 years!), there are ways to legally maximize your profits with every transaction. Listen in to hear Dave’s strategy and investing advice — and learn how it has worked for his family and clients.
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Time Stamped Show Notes:
- 01:30 – Introducing Dave, who got into real estate after having his son and wanting to spend more time with family
- 02:10 - He and his wife didn’t want to sacrifice their lives to a career; they got into the last real estate rush before the crash and bought a property in Denver
- 02:55 - His accountant broke the news that, after taxes, he actually didn’t make much profit for all the work; then he learned about the 1031 exchange
- 03:30 - Now, for the past 20 years, he’s been doing them for himself and others
- 05:30 – Dave’s CSIRE story
- 05:45 - He and his wife turned a real estate investing career across four different markets into a sailboat that they lived on for 10 years with all four of their boys
- 06:30 - They used investment money to pay for it and used Section 121 for their primary residence
- 07:00 - On Section 121: If you live at a property that you own for 2 out of 5 years, you can take the first $500,000 in profit tax-free
- 08:00 - You can use that once every two years; it’s not a once-in-a-lifetime opportunity so you could take profit tax-free 8-9 times over a lifetime
- 08:50 - You don’t have to keep your 1031 real estate as investment real estate forever; he and his family combined the 1031 and Section 121 to pocket the profit
- 10:40 – Another CSIRE story
- 10:50 - One of the homes they lived in was a set to a movie called Reservation Road; then they went to Florida
- 13:00 - He has friends that are leveraging the 1031 Exchange and Section 121 to fund their retirement
- 13:55 - 1031 Exchanges require the use of an intermediary and a QI to make sure everything aligns with the law; there are regulatory hoops to pass
- 14:50 - Real estate that qualifies for 1031 Exchange must be intended for use and to hold; Dave had a friend who wanted to sell after a month
- 15:20 - He did intend to hold it, which was in a contract, but the tenant moved out unexpectedly due to a bear that moved in next to her trash can
- 17:25 - He did the 1031 Exchange and everything was fine; the intention was there
- 17:50 – Dave’s piece of real estate investment advice
- 18:00 - You make money when you buy, and you keep your money when you sell; as long as you own the property or sell it into another 1031, you’ll never pay the tax
- 19:00 - When you die, it doesn’t matter how much tax you have built up; your heirs get it as though they paid market value for it so that tax goes away
- 19:22 - Buy it right, sell it right, and enjoy making money for yourself and your heirs
- 19:55 – How to get in contact with Dave: his website and go here for a $50 coupon on your next 1031 Exchange deal
3 Key Points
1.) Get educated on the 1031 Exchange.
2.) Research Section 121 and see how you can leverage it!
3.) Don’t do something just because you think you can get away with it but don’t not do something because you’re afraid of getting questioned about it.