Updated almost 5 years ago on . Most recent reply
What's an exchangor?
How many people really know what an exchangor is? Why would you call yourself an exchangor? Does BP need a category dedicated to exchangors? How do exchangors make money? Anyone out there that focus on being an exchangor?
Most Popular Reply
Just keep in mind when you trade that it doesn't relieve you of the tax burden, unless you do a 1031 exchange. In other words, trading land to a developer is the same as selling land to a developer and using the cash towards buying one of their properties. You have both agreed on a cash value of the land and they reduced the house sale price by that amount. That is your sale value of the land for tax purposes. Same on the receiving end, the contractor realizes profit equal to the land value. Sometimes people intentionally under estimate the value in a trade to avoid taxes. IRS is pretty aware of that, so just be careful if that was the purpose of the strategy.
I am not a fan of holding vacant lots, unless you are in a very high appreciation area. Holding farm land or timber land would be better because it produces income. Vacant lots are usually a liability, because you need to maintain them and pay taxes, yet they produce no income. Bottom line, good for you trading up to a rental property.
As far as the term exchangor, I don't usually hear that term used, although people do this type of thing all the time. They may trade real estate or even other goods towards real estate. When I built my current home, I gave my contractor a four wheeler in exchange for the deck. A friend sold a property and took a Jeep on exchange towards the property. You just have to be a little careful on these arrangements due to the tax ramifications.