Most of us Americans, when looking towards retirement, try to figure out ways we can make our finances go a little further. If you own investment real estate such as a rental home or condominium, raw land, or commercial property, there are opportunities available to all of us. We can purchase our retirement home with investment money that we would be fully taxed on when we sold the property.
We are always looking for ways to stretch our dollars when you sell your personal residence. In most cases, the proceeds are tax-free up to $500,000 for a couple or $250,000 for a single person. You can use that money to buy your retirement home, but then you’ve taken money you have removed from real estate tax free and put it back into real estate. Let’s look into it differently. You should look into buying home through a 1031 exchange and take that money that would otherwise be taxed when selling the other properties you own. By doing this, you are using pre-tax dollars to purchase the home that you would eventually like to live in. The proceeds from the home that you are selling that you live in now that would become tax-free now. To be used for your discretion and disposable at your pleasure. That money can also be used for an investment that will pay you monthly to finance your future income for the retirement years. You could invest in annuities or other income producing instruments. This needs to be discussed with you tax advisor to determine what is best for you.
We, as knowledgeable real estate brokers, enjoy doing many 1031 exchanges. More than twenty for myself and over a hundred for others. I would suggest with some good planning you would be able to research an area that you would like to live in. I would suggest you locate an area that offers the things you enjoy doing. Once you find the area to live, that is time to find a place or community you would like to live prior to listing the initial investment and then sell your to sell your present real estate investment. Once you have a place in mind, place the funds from the sale in a 1031 exchange, arranged prior to closing. Then when you find that special property in an area where you would like to retire for the latter years of your life, you could make that investment prior to the time you would like to relocate to that property after you would like to retire. The house hunting can happen prior to the selling, but that can lead to disappointment if it takes too long to sell. I suggest finding the area then focus once you have the offer accepted.
A 1031 exchange allows you 45 days to locate a property after the closing of the prior property. The property you like can then make the offer, get it accepted, and then send to the 1031 accommodator who will in turn close the property in the 1031. Once you have made the offer and have it accepted for the required figures, the identification of property can be completed. You have a total of 180 days to close the property but there is no need to waste any additional time at all once you’ve located the property you can close it at any time. When you’ve closed the property they will then, according to the IRS, need to lease the property for the foreseeable future. The experience we have seen is the property needs to be leased for approximately two years. It is a good idea to get that time started in case the time frame moves up. People get early outs for retirement from jobs all the time and kids move away (life happens).
At the end of the two years, if your situation has gotten to the point where you can retire and move from the area we are now living, consult your tax advisor and find out the strategy that you would need to improve the property to your satisfaction. There may be a way to do that under improving rental property (for write off purposes only). Prior to your move, check with your accountant to verify the length of time it must be rented and what improvements can be made and written off.
There are many discussions that need to be analyzed prior to making the decision to locate the property you would like to eventually retire to. Some people have friends and family that live in areas where they would actually like to retire. Maybe it’s time to look into some of those areas to see if that is a place you’d really like to retire. Maybe plan a couple of vacations to go look at the areas that you’re thinking of moving to. Find out if they offer what you’re looking for in the life that you’re after. The two of you or just yourself can plan a vacation to investigate and area and see if that is the right place for you.
Las Vegas area has so many things to do and so many boxes that can be checked off as a place to retire. We believe it is an area that should be considered when you are looking for that retirement home. There are other places where you may consider. We have provided a lot more information but the fact remains: there’s no state income tax, travel to and from this city are unparalleled. Your relatives would love to come and visit you here. There are many people who have retired here so there will be plenty of people to make friends and do fun activities with. The entertainment is everywhere throughout the entire town. This is just things to consider and we hope you enjoy reading their way through the site and we would love to help you when you decide to come visit our city.
