Loading...Loading...One of the fantastic things about real estate investing is the tax advantages that come with it. The IRS allows you to sell a property and roll over the funds to purchase a different property without incurring capital gains taxes.
One of the fantastic things about real estate investing is the tax advantages that come with it. The IRS allows you to sell a property and roll over the funds to purchase a different property without incurring capital gains taxes. In addition to depreciating the home and writing off its mortgage interest, there’s also the 1031 Exchange, which allows a property to be sold “tax-free.”
Adam saw the opportunity to sell his condo and swap it for a Doorvest investment property in Columbus, OH, by leaning on a 1031 exchange. Keep reading to learn more about his journey with real estate investing and how his 1031 transaction went.
I started this journey back in 2008 by purchasing a condo in Santa Clarita, CA, which I bought using an FHA loan. After living there for several years, I moved and converted the home into a rental property. The great thing about having income properties is that the debt on the condo did not count towards my DTI as long as I had a renter in place, so I kept rinsing and repeating. I left this home and did the same thing - rented it out and bought a new place.
Fast forward, it’s the end of 2022, and I got tired of managing the condo I owned; there were many issues arising, and I wanted to be mostly invested in single-family homes.
When I sold the condo, I had a few options:
Or
2. Pay the capital gain taxes that would have equated to tens of thousands of dollars (high 5 figures)
If I couldn’t find a new investment property that made sense to me, I probably would have paid the capital gains tax and moved on - especially since I had a limited amount of time to find a new property and move forward without the 1031 exchange.
Well, I started looking in my local market in Southern California, but even then, the ‘best’ home I could find was in the $700,000 range and even then, it required renovations and rehabbing.
One day, I received an email from my 1031 exchange company, First American, about Doorvest and your value propositions sold me for three reasons:
It’s important to note that before I went ahead with buying through Doorvest, I actually vetted a few highly endorsed real estate agents in Columbus, OH - the market I was mostly interested in due to their growing economy backed by Intel’s $20B chip factory investment.
These agents sent me a lot of available options for homes, and after reviewing all of the available options, we narrowed it down to 2 homes that we considered putting an offer on.
I thought going with an agent over Doorvest would save me money, but when I evaluated the homes and the fees, the total costs would have been equivalent to Doorvest with a few cons.
The agent route would require a more traditional approach where there would be much more uncertainty:
Ultimately, the Doorvest home was a higher quality home, with more renovations that were already completed and within proximity to Downtown Columbus and the new Intel chip factory.
It was a simple and smooth transaction. The Doorvest team made it easy, and there were no hassles. Though there was some paperwork, it was much less than I experienced going the traditional route, and Doorvest made it feel more like the click of a few buttons to own a rental home. Their consistent communication was key.
Yes. A question I think many clients, including myself, will find themselves asking is: “What if something happens to Doorvest after I purchase my home?”
And it’s important to note that the rental property belongs to the buyer - Doorvest does not own any part of the home after the purchase. They then are only responsible for providing property management services. If anything happens to Doorvest, I will simply need to find a new property management company.
My advice is always to do your research and educate yourself. Secondly, it really doesn’t hurt to have a conversation with a Doorvest Client Partner - they are warm and friendly, and I had a great experience working with my Client Partner. He did a great job in facilitating the transaction, and there was never any pressure.
I would love to see Doorvest continue to build robust analytics and reporting to share relevant home and financial data so that I can better understand my home’s ROI over time.
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