Investor Exit Strategies Coldwell Banker Northern California
San Francisco Market Street Office

Exit Strategies for Investors

Many of our investor clients have taken advantage of Section 1031 of the Internal Revenue Code to avoid capital gains tax.  When you do a 1031 Exchange via a specialized 1031 exchange company, you are allowed to sell your property tax-free as long as you take the proceeds and use it to buy another equal or more expensive piece of real estate.   The exchange happens via a specialized 1031 exchange company who structures the sale of your old property and the purchase of your new "leg-up" property in a way that avoids the capital gains tax. 


Exit Strategies

Here are the ways you as our client can use 1031 Exchanges as an exit strategy from investment properties:
  1. Under the guidance of your CPA, you can "exchange" your investment property for a home, condo, or vacation property that you would ultimately like to live in.  After the requisite period of time deemed appropriate by your accountant (the rule of thumb appears to be several years), you can then move into your new property and convert it to your personal residence.
  2. You can increase your leverage by buying a larger income property, which has abundant "upside" in rents that will ultimately produce a higher net income.  This course of action is typically part of an overall long-term investment strategy that uses leverage to increase your income and enhance your real estate portfolio.
Please keep in mind it is essential to review these matters with your investment advisors and accountants before making decisions about your real estate investments.