What is the goal of a real estate investor? Jason defines it as creating a lifetime of substantial income from investment properties. This seems like a good way to look at it. So should you sell your properties after a certain amount of appreciation in value? That would be one way to do it but wouldn’t it make more sense to take advantage of the appreciation AND keep the property?
Here’s how the traditional real estate investor operates: invest in rental properties. Let them gain in value, take advantage of tax benefits, enjoy cash flow from the properties over the years, then sell them, take the capital gain and use that to live our lives. That definitely will work but maybe there’s a better way.
We want to keep the Golden Goose alive and producing income for us. You can’t do that if you slaughter it by selling the properties. Do that and you not only lose value the properties were producing but also incur a taxable situation. At Empowered Investor, we like to avoid those.
The way to have the best of both worlds is to go ahead and sell the property but use a 1031 Exchange to reinvest your money in another property and pay no taxes on your capital gains from the sale. You can employ this strategy over and over throughout your lifetime and never pay tax, always deferring it to the next investment. Don’t try that in the stock market or with a business.
