Exit Strategy: The lifecycle of a real estate investor tends to evolve to the point that one day; the investor would like to slow down, cash out, or retire. Whether the investor owns rental houses, warehouses, land, office buildings, or apartment complexes, a potential replacement property could be a well-located, residential property in a resort community in an attractive setting – such as a beach resort or mountain property.

To qualify for tax-deferred status, if those properties are purchased through a 1031 exchange transaction, they must be held for investment. To demonstrate the intent to hold for investment, most investors simply put those properties on a rental program with a management company or manage the property rentals themselves. However, at some point in the future, that same investor has the opportunity to employ a very powerful tool known as conversion.

Suppose several years after completing the 1031 exchange, the investor elects to move or retire full-time to the beach (or the mountains, lake, or golf community.) At the time the investor moves into the previously rented investment property, no tax obligations are due. The investor simply converts a property held for investment into his or her primary residence. The ultimate opportunity comes several years down the road, if and when the investor decides to sell the newly converted residence. At the time of that sale if the homeowner meets the residence requirements of ownership, occupies the property for at least two years, and held that previously 1031 exchanged property for at least five years, he will qualify for the $250,000 or $500,000 residential sale exclusion.

It is my hope that the information contained is helpful and should any one strategy or concept make your investments sounder, I would be glad to offer you any assistance at ”http:// www.c-loans123.com”. You should consult your accountant before making a final decision on these or any investment proposals.

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