To 1031 or not... that is the question
I am going to sell some property and am wrestling with whether to 1031 or take the tax hit and sit in the cash.
1031: Buy real estate now with tax deferred proceeds and cash flow now with 100% of the proceeds.But when (not if) the next crash comes, could lose up to 40% of value or more.
Tax Hit and Save Cash: ~24% tax hit, but have cash for the next downturn, and can purchase more property with less capital, and potentially see greater gains as the market eventually recovers.
I would greatly appreciate some perspective from experienced real estate investors with 10-15 years of experience (that means you lived through the Great Recession and had property during the last crash)
Most Popular Reply
One thing people often forget about the crash of 2008/9 is the fact that it took years to bottom out.This is just my view, but losing 24% (or whatever the tax rate is) guaranteed and waiting for years don't seem like a good plan. And this assumes that a very bad crash comes soon, AND you will be predict pretty accurately when to get back in the market.
Soh