Case Study: Maximizing Returns with a 1031 Exchange
Scenario:
A property valued at $1 million is poised for sale, and the owner is considering the implications of capital gains taxes. Let's break down the potential financial outcomes.
- Scenario A: Selling and Paying Taxes Directly
If the property is sold outright, capital gains taxes, depending on the tax rate, could significantly impact the net profit. For instance, with a 20% capital gains tax rate, the owner might lose $200,000 in taxes, leaving a net gain of $800,000.
- Scenario B: 1031 Exchange with Wollaston Real Estate Investments
Now, let's explore the alternative – a strategic 1031 exchange. Instead of losing $200,000 in taxes, the full $1,000,000 can be reinvested into another asset with Wollaston Real Estate Investments as an operating partner. Through strategic value add scenarios, we can create lucrative passive income opportunities with strong equity upsides. For this example, assume a $1,000,000 million dollar investment will yield a $2,000,000 property sale in 36 months. Our investor will receive a 50% return on their investment, secured by real estate which can be sold and reinvested again through another 1031 exchange.
Conclusion:
By opting for a 1031 exchange and strategically partnering the proceeds with Wollaston Real Estate Investments, the investor not only avoids immediate capital gains taxes but also experiences a substantial growth in value.
