Invest in a Real Estate Legacy by Joe Edge

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Invest in a Real Estate Legacy

By Joe Edge, President and Broker

I have never met a person who didn't have a desire to leave something to their family that represented their life's work and accomplishments. We all want to leave a legacy that helps to provide for our loved ones long after we are gone. Currently, those in the baby boomer generation are struggling with the issue of how to pass along their assets and legacy without leaving huge tax burdens. Personally it makes by stomach turn knowing that you can work your entire life to build up a portfolio of assets only for it to later be taken from your family in the form of taxes. This is precisely why many professionals make a living by helping people properly plan to prevent these types of tax problems. The good news is that real estate can provide a unique avenue for protecting your estate from large tax liabilities, provided you plan early enough for your strategy to be effective.

Investing in real estate early is smart. Real estate investments provide tax write-offs and appreciation, there are all many types to meet different needs, and there are numerous ways for small investors to group their money through crowd funding or syndications. And the problems you experience can often be good problems, like what to do with the profit from a real estate transaction. With "problems" like profits, you can simply pay the capital gains tax and keep the profit or you can roll the profit over into a 'like-kind' investment also known as a 1031 exchange. Doing a 1031 exchange enables you to defer the taxable gain to a later date, allowing you to preserve your wealth and pass it along to your family at an adjusted basis. A family that inherits property that was in a 1031 starts with an adjusted basis in the property rather than the 'deferred' basis that was built up over a lifetime of good investing. That enables the estate to avoid a large portion of what would normally be taxable capital gain income.

Inflation is another reason to invest in real estate early. For investors, the key to making money in an inflationary environment is to hold investments that increase in value at a rate in excess of inflation. Real estate specifically can be a very good investment in an inflationary environment particularly if you have debt on the property and are using it for rental income. In this scenario your property values increase, your rental income increases, but the mortgage amount remains fixed. This is a reason why it also makes sense to leverage property with debt in your younger years. The interest write-off from the mortgage also provides a great tax break for you for as long as you have the loan. 

A shrewd investor will invest early in their life. If you don't think you have enough money to invest in property, do it through a syndication or through crowdfunding which will enable you to pool a small amount of money together into large pots to do large deals with other investors. And when that property sells, make sure that you have set it up so that you can do a 1031 exchange into your next property. That's how wealth is built. Protect your investment with sound tax planning. Consult with CPAs and tax attorneys and get multiple opinions. Real Estate provides a legacy that you can protect from estate taxes and provide an income stream for your family for years to come. But you must start early and you must engage in sound planning.

Joe Edge, CCIM, SIOR 
(706) 722-8334 ext 206

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