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1031 Exchange Example: Matthew & Beth

Boost Your Income and Bid Farewell to Landlord Responsibilities

The allure of rental property ownership is undeniable—strong rental markets, appreciating property values, and the satisfaction of being your own boss. However, the other side of the coin presents challenges like expensive maintenance, stressful evictions, and the complexities of property management. Some landlords turn to external property management services, but this can compromise the cash flow they depend on. Increasingly, landlords are choosing a 1031 Exchange to transition into Delaware Statutory Trust (DST) investments, effectively boosting income while shedding active management duties.

How Matthew & Beth Paved the Way for a Relaxed Retirement

Matthew & Beth were long-time landlords of a single-family rental home in San Diego, bought in 1987 for $54,000. By 2020, the time had come for them to retire and relocate closer to family. Teaming up with 1031 Exchange Place, they smoothly transitioned from property owners to 1031 exchange investors in DST real estate.

Their Investment Goals

Matthew & Beth had several goals for their 1031 Exchange. Primarily, they aimed to retire and live near their family. Taking this into consideration, their advisor at 1031 Exchange Place recommended a mix of DST properties that required zero active management and could generate a steady monthly income.

Property They Sold

  • Location: San Diego, CA
  • Original Purchase Price: $54,000
  • Current Valuation (2020): $700,000
  • Debt: None
  • Net Annual Income: $36,000
  • Net Sale Proceeds: Estimated at $651,000

The Financial Upside of the 1031 Exchange

  • Net Proceeds from Sale: $651,000
  • Original Tax Basis: $74,000 (Original price + capital improvements)
  • Estimated Taxable Gains: $577,000
  • Estimated Capital Gains Tax: $198,467
  • Depreciation Recapture Tax: $15,885
  • Total Taxes Deferred: $214,352

The Strategy Employed

Matthew & Beth needed a reliable monthly income post-retirement. Accordingly, a portfolio of DST properties was recommended that could potentially offer stable income.

Their New DST Portfolio

1031 Exchange Place curated a diversified portfolio for Matthew & Beth, comprising of:

  • 60% in Net Lease properties and 40% in multifamily properties, to optimize income.
  • A new depreciation shelter of 50%
  • $390,000 in 21 single-tenant net lease properties (1 DST)
  • $261,000 in Class A multifamily properties in Las Vegas, Nevada (1 DST)

The Happy Ending: Goals Met Through 1031 Exchange

By leveraging the 1031 Exchange into DST real estate, Matthew & Beth met all their goals. They deferred all applicable taxes, relinquished the responsibilities of active property management, and created the potential for a stable monthly income in retirement.

Act Now to Reap Similar Benefits

Are you in a similar situation as Matthew & Beth? Interested in deferring taxes, relinquishing active property management, and increasing your potential monthly income? A 1031 exchange into DST could be the golden ticket to your financial freedom. Don’t delay—contact us today to explore your options.

1031 Exchange Advisor

Nicholas Dutson has been a dynamic figure in the 1031 exchange industry since 2007. With over two decades of experience in marketing and web development, Nicholas has demonstrated his entrepreneurial spirit by owning an INC 500 company and maintaining a multi-year presence in the INC 5000 list. He is renowned for his dedication and passion for his work. Outside of his professional endeavors, Nicholas is a devoted father to two teenage boys. Together, they share a love for mountain biking and exploring the outdoors on their ATVs every weekend. Nicholas’s commitment to excellence is evident in both his career and personal life.