BiggerPockets

Hi all, I went to a Rich Dad Poor Dad seminar a while ago and got some information I believe is false. I went to this seminar one of the free ones and this speaker went on to stress this point in saying that if you take out a loan from a Hard Money lender or a bank, then any money you make from selling the house is tax free! I have been reading and checking out the different forums and I have found that is not true. I just wanted to hear it from someone else if it is true or not? He was not talking about selling the house and investing in another house he was talking about selling the house and having all that money tax free.

Nothing is ever tax free!! :cool:

Something must be getting lost in translation here.

I would assume they are talking about a 1031 exchange, but you are actually deferring your tax, not really eliminating it.

That said, you need to hold a property for a certain amount of time to perform a 1031 exchange.

Maybe I am missing something, but in my experience with the Rich Dad materials, it has been some pretty good info.

Francisco,
They may have been making the point that: when a property appreciates, you can refinance or take out an equity loan and that money/equity is tax free UNTIL you sell the property. It might be tax deferred after selling if it qualifies for a 1031 exchange.
I went to one of their seminars a while back and remember them making the point that you can tap the appreciated equity tax free by taking a loan.
They should stress that this "tax free" status is only for the duration of the time that you own the property or execute a 1031 exchange.

The technique mentioned by the original poster was misunderstood. It is meant to defer taxes by utilizing a cash out refi to get equity out tax free. Once you sell the property (assuming a net gain) you will be taxed unless you defer again via a 1031 exchange. While this method was very effective and still can be, it is harder to do due to the tightened lending market and thus, it is necessary to research alternative strategies to defer/eliminate taxes.

Thank you all for your responses! I was sure that wasn't the case, the speaker was saying that this was cash in your pocket. That you could use for more investments, but he was also saying that you could use the cash for paying credit card debt and day to day expenses. I wanted to put this out there incase someone else goes to one of those seminars and comes back thinking that there profit is tax-free. Thank you all.