Every real estate investor wants to make money with minimal headache, stress, and effort. Time is of the essence, and the last thing you want to be doing is struggling to put your money to work.
So, don’t. At NNN Deal Finder, we have a sterling network of real estate professionals, including realtors, brokers, inspectors, contractors, and more. We understand the marketplace and we know what it takes to create a robust passive income.
With a specialty in 1031 Exchanges and triple net properties for sale, we have helped clients build the durable, predictable cash flow they want and deserve.
Make the most of your Utah investment property today.
Why Invest Through a Utah 1031 Exchange?
The Utah real estate market is hot right now thanks in large part to rapid population and job growth. The job market has enjoyed impressive growth for over a decade now, with many people from other metropolitan areas coming to Salt Lake City in particular.
With an 18% population growth rate for the past 10 years, Utah continues to be one of the most attractive real estate markets for investors. If you’re looking for a fair market value property in Utah, a 1031 Exchange is one way to get it.
Top Realty Markets in Utah
There are various real estate markets in Utah ideal for savvy investors. Whether you’re seeking NNN commercial realty and businesses, single-family or multi-family housing, or vacant land to develop, you have options in Utah.
Replacement Property in Provo
Provo has experienced stratospheric growth, fueled by a diverse and animated jobs engine. With home values increasing over 17% in the past 12 months, this location is perfect for smart investors.
Another great aspect of Provo is that more than half of its residents rent out their houses and apartments. Single-family and multi-family residences are booming, and tenants’ rent prices have been steadily climbing for over half a decade.
With its robust economy, low unemployment, and countless job opportunities, Provo remains a hot spot for investors all over the country.
Investment Property in St. George
With nearly 10% population growth and 5% job growth expected in the next three years, St. George is slated to be one of the fastest growing cities in Utah. It’s also a hub for outdoor activities and home to two great parks, Zion National Park and The Grand Canyon.
With a median home value of a tick over $300,000, the values are predicted to continue to climb. Understandably, investors are excited.
Salt Lake City Real Estate
As Utah’s biggest population center, both the city and metropolitan area are drawing the best of industries from far and wide. Whether an exciting tech startup, an established healthcare firm, a top financial institution, or a beloved hospitality company, the industries in the city continue to grow.
New property within the city may be pricey, but knowledgeable investors can find more affordable real estate in the metro area.
Current Property in Ogden
This stunning town is home to a great education system, basement-level unemployment rates, and a buzzing economic center. With an equal attraction to outdoor and indoor amenities, the town of Ogden is a top investment spot for anyone looking to put their money to work.
Since 2021, the average fair market value has increased by 20%, which is particularly attractive given that current property listing prices are markedly lower than those in surrounding towns and cities. There is plenty of upside and room for appreciation.
Understanding Relinquished Property and Replacement Property
However, before you purchase replacement property, or even relinquish property, you need to understand how the 1031 Exchange works. You should seek investment real estate that is aligned with the internal revenue code and that meets all requirements of the 1031 Exchange rules and regulations.
Any relinquished property and replacement property exchanged under Section 1031 must be similar in certain ways. To defer capital gains taxes and get the most value for your money, you need to find a property that is like-kind.
Defining Like-Kind Property
Like-kind exchanges refer to 1031 Exchanges whereby investors purchase replacement properties that are similar in nature or class to the properties they put on sale. In other words, any property you sell can be like-kind with another property on sale, even if their qualities or grades are completely different.
Real estate does not have to be the same asset class to be like-kind. An apartment can be exchanged with a single-family house. What matters is that the properties are used for business or investment purposes and located in the U.S.
This productive use qualification excludes personal property, vacation homes, and primary residences. Unfortunately, your beach house in the Virgin Islands does not qualify!
Obtaining Like-Kind Property for Sale
When seeking replacement property, the taxpayer does not need to focus only on one. A taxpayer can identify up to three properties of any value, so long as the values do not exceed 200% of the value of the relinquished property.
There is an exception if 95% of the value of the real estate identified is acquired.
The property owner in a 1031 Exchange must be sure to calculate the numbers accurately and ensure that all necessary exchange funds are accessible and properly allocated. A qualified intermediary or title company can help with escrow, proceeds, and the process at large.
Any 1031 specialist, escrow officer, or qualified intermediary may be able to help you determine the type of 1031 exchange right for your needs. If you want to defer having to pay taxes on exchanged property, the replacement property must be of equal or greater value than the relinquished property.
There are various like-kind tax deferred exchanges a taxpayer can use to sell and purchase investment properties.
Which 1031 Like-Kind Exchange Is Right for You?
Whether you want to exchange an apartment building for a general retail business or use exchange funds to purchase a new single-family investment exchange property, your options are varied. The exchange period ends after 180 days, and some exchanges are more useful than others.
Delayed 1031 Exchange
This is the most common form of 1031 Exchange and allows the exchanger time to identify replacement properties. The exchanger must identify like-kind real estate within 45 days and close in 180 days.
This gives an investor time to sell, put money in escrow, and search for replacement real estate.
Simultaneous 1031 Exchange
In this real estate exchange, replacement properties and relinquished properties are swapped at the same time. This is rather uncommon and often difficult to do given differences in equity, debt, and other real estate aspects.
Improvement 1031 Exchange
This 1031 Exchange is ideal for people who want to build equity and increase property value through refurbishment and capital improvements. However, the one property being improved must be substantially the same property identified by the 45-day cutoff.
The replacement property must not be so improved that it’s new.
Reverse 1031 Exchange
This final exchange involves purchasing the replacement investment property first before the sale of the previous property. You should contact a qualified intermediary to temporarily park the purchased property. The relinquished property and replacement property must be managed under a formal agreement.
Calculations to Defer Capital Gains Tax
Again, the main benefit under Section 1031 is the tax-deferred exchange. This is a great way to diversify one’s portfolio, using escrow proceeds to make larger down payments to acquire more lucrative properties.
With the sale of the relinquished property, savvy investors can use the exchange as a vehicle for equal or greater passive income growth, while adhering to the internal revenue code. A qualified intermediary can help.
Determining Your Capital Gains Taxes
Selling without a 1031 Exchange can be very problematic. Your replacement property should be an investment in which your money goes to work for you. That’s why the 1031 Exchange is the preferred vehicle for deferring capital gains tax. If you want to defer capital gains taxes on your replacement property, you’re in good company.
To determine your total capital gains tax, first add up the following:
- Original Price of Investment Property (Cost Basis)
- Investment Property Improvements
- Expenses When Sold
Then, subtract the sum of these values from the price at which the property was sold. This gives you the total capital gain. In order to calculate the taxes you’d be paying on your total capital gain (if you sell without using a 1031 Exchange), add up the following:
- Federal Capital Gains Tax
- State Capital Gains Taxes
- Net Investment Income Taxes
- Depreciation Recapture
Once you add all these up, you get your total tax liability. This is how much you would have paid or would be paying under the various tax brackets. Just goes to show what you’d be missing out on without a 1031 tax-deferred exchange!
Tax deferment and 1031 Exchanges are the way to go for productive investments.
Getting Invested Through 1031 Exchanges
The 1031 Exchange is undoubtedly an attractive option. By using sale proceeds and making the most of 1031 tax-deferred exchanges, a savvy investor can enjoy great benefits.
Still, we know it’s hard for our clients. There are numerous properties, rules, and regulations for anyone wanting to buy or sell. You may be unsure. You may fall for market traps and deceptive industry practices.
This is why you deserve top-notch 1031 advice.
At NNN Deal Finder, we’ve helped clients all over. Whether they’re struggling to sell, need help with escrow, are curious about replacement property tenants, or want to maximize the proceeds from what they just sold, our experts know how to help.
Check out our website for more info and contact us by phone or email today.