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Welcome back to Go Gaddis Real Estate Radio right here, nine 20. The answer in this segment is a 10 31 Exchange a good idea when selling your investment property and if you're buying in an unfamiliar neighborhood. How can you make sure that you will like your neighbors? And I know that's not an, that is an unpopular thing to say cuz it's like, well, wait a minute, you're gonna judge your neighbors.
The truth is everybody wants to live in a place they feel comfortable living in and they feel welcome in their own neighborhood. My name is Cleve Gaddis and you're listening to Go Gaddis Real Estate Radio, where we help listeners go from real estate and offices to. So home selling and buying can be done with total confidence and without all that worry that is so typical with life's biggest investments.
We don't want you to make any decision at closing or after closing on information that you should have gotten for. We don't want you to learn anything new at closing or after closing that you should have learned before. We want to connect with you and it's real simple. Go to go GA us radio.com, G O G A D D I S radio.com.
You can ask questions, make comments. You can push. You can share your ideas with us. You can request your neighborhood be featured in our neighborhood spotlight, and you can subscribe to our podcast. I would love for you to be a podcast subscriber. Why? Well, I think I'm fun to listen to now. I don't know that everybody, everybody agrees with that.
But, um, I think we give good valuable information for Atlanta homeowners, actually people all throughout Georgia and all across the country. And I think it makes sense to listen. I would say some of our biggest listening audience around the country is real estate agents. Um, and I think what they're trying to do is they're trying to learn how to communicate with, uh, consumers about the market.
And I love that we've got such a big audience. Do you wanna be confident when selling your investment property confident that you won't have to pay any taxes? Uh, I don't know if you think about this, but if you bought a property per a hundred thousand and today was worth 400,000, that's 300,000 in capital gains.
Yes, you could certainly deduct some costs from that 300,000 in gain, but if you paid capital gains taxes on that, I believe it's actually at the same income tax rate. So if you were at 20 or 25%, you could actually have a fairly large tax bill. The US government, uh, was actually sued by a gentleman who exchanged one property for another.
Meaning they just gave the title of one property in exchanged for the title of another, and the government said there was a gain. You gotta pay tax on it. This gentleman's last name was Starker, and there is an exchange service in the United States called Starker Services. That's where it got its name from.
And Mr. Starker sued the United States government and Section 10 31 of the Internal Revenue Code was created. And the way it works is, uh uh, I was gonna say, the way it works is simple. It's really not simple. And so when you hear it, you're gonna think, oh my gosh, I'm not even sure I'm smart enough to do that.
But you must first of all, exchange like kind real. So it must be, uh, real estate for the purpose of making money. So if you had a location for a carwash and you wanted to exchange it for apartment community carwash for making money, you couldn't exchange the business. But you exchange the re rental, the real estate property, apartments for making money that works.
Single family rental home, single family condo, that's also a rental home. You could exchange those. You cannot exchange a property in the US for something outside of the United States and you. Exchange something that was a rental property for the specific purpose of producing rent for a single family residence that you will actually live in.
Those are not like kind properties. So it's the use of the property and the fact that we're producing income on the property that makes them like kind. If I've confused anybody at all, feel free to reach out to me at either go gaddis radio.com or 7 7 0 4 9 7 0 0 0 0. So the way it works is the government says, well, if you're exchanging one property for.
There is no capital gains in that transaction. So let's say I have a property in Metro Atlanta. I have one in Sandy Springs. I get it under contract. I have it ready to close at $600,000 and I have 300,000 in profit. I have 300,000 in capital gains, and I don't wanna pay taxes on that. I wanna take that 300,000 and get it into another property so it can continue working for me.
Maybe I'm retiring, I'm gonna live up in the Gainesville area. And I decide that I would rather have that 300,000 inequity in a property that is up closer to me. So what I do is I hire an exchange intermediary if it were me. I like to hire title insurance companies to be exchange intermediaries. I've heard some stories over the years about attorneys stealing money, uh, from, uh, 10 31 exchanges.
And so I like to make sure that I have some coverage, that there's some insurance, that the, the funds are bonded. What would happen is, let's just say it was called a b C intermediary, or a b C 10 31 exchange. Then I would sell my $600,000 property before I close on it. I would assign that contract to the a b ABC 10 31 exchange that has an inter, the money would pass from the buyer directly to the intermediary, which means the money never came to me as the owner of the.
Then after closing of this relinquished property, which is what that $600,000 property in Sandy Springs would be, I have 45 days to go out and identify three properties. Now, this is not the only way to do an exchange, it's the only way I'm gonna discuss on the show today. There are different ways to do exchanges.
You can do 'em in reverse. You can do 'em for multiple properties, but it gets very complicated when we get outside of this. This simple example. So close my $600,000 house in Sandy Springs. Got a $300,000 gain. I'm trying to take that 300,000 and get it into another investment property. I find ABC 10 31 exchange intermediary that can bond the money.
Maybe it's something sponsored by a title insurance company. I sell the property, they have my $300,000 in capital gains sitting in their account, ready to buy another property within 45 days of the closing of the relinquished. I must identify up to three properties that I will use as a replacement property within 180 days of the closing.
On the first one, and there are some exceptions to that, if you close really late in the year, you have to have your exchange done. By the day taxes are due, which I think is April 17th this year, if I remember correctly. And so you might not have a full hundred 80 days, but normally you have 180 days from the time you close to actually close on the property.
So let's just. That within 45 days, I identify three properties. We notify the IRS of what those, which ones of those properties, of the addresses of those properties, and I wind up closing on one of those properties and it's a $400,000 investment home, a B C 10 31 exchange intermediary. When I write the contract on the replacement home, I write it in the name of.
Exchange intermediary, and then the exchange intermediary closes on that property and then they ex they transfer the title back over to me or my investment entity. I know that is a long, drawn out explanation. I will tell you there's a little bit of a disadvantage. Uh, sometimes I notice with people doing 10 31 exchanges and it's there in such a hurry, sometimes they make really bad investment decisions, so I would encourage.
And this, by the way, was a question from Robert and Tequila. He said, we're selling an investment home and wanna avoid taxes by doing a 10 31 exchange. He wanted to know how it works. Sorry, I didn't recognize the question before I got started, but don't be in a hurry. Understand what the tax consequences would be if you actually pay taxes on the gain, and then make sure that the property you're buying make sense.
So I've seen people to save $30,000 in taxes, spend 50,000 too much on a property to buy when the market was crazy. Now that doesn't make any sense. You'd be. Take your 30, pay your taxes on it. You'll be better off than spending 50,000 on a property that that may or may not give you a return. 10 31 exchanges have been around for a long time.
I used to teach real estate agents around the country how to do 10 31 exchanges and help people invest through their S D I R A. So if you ever just want to have a conversation about how that stuff works, then reach out to me. 7 7 0 4 9. 0, 0, 0, 0. If you've just joined us, you're listening to Go Gettis Real Estate Radio right here on AM nine 20.
The answer, are you nervous? Are you a buyer? And are you nervous about buying a home in an unfamiliar neighborhood and not knowing really who lives, oh, to the right of you, to the left of you across the street? How can you make sure. That you have good neighbors and you can't go judging people. Real estate agents can't say this is a neighborhood with good neighbors or bad neighbors or whatever.
But one of the things that we do is we do neighbor visits as we're helping people buy homes. And so when we put someone under contract, we actually knock on the homes two next door, you know, one on the right, one on the left, and we knock on the three across the street. And we have a little list of questions that we.
Ask the owners of those homes. And in some cases we've had buyer clients that have gone right there with us. We've knocked on the door. And it's interesting because when people find out, we're doing a little research to find out things about the area, about the whether or not the neighborhood is quiet, whether or not the amenities or.
Kept up. Well, whether or not there are any problems. It's amazing how many people are really open and honest. And I will tell you that overwhelmingly, they are very welcoming of the new neighbors. They want to live near good people. They're good people, and they're overwhelmingly welcome. I do wanna tell you a quick story, and I was, uh, knocking on doors around the listing that we were selling over in, uh, DeKalb County.
I don't remember exactly where, Decatur, if I remember correctly, And knocked on a door and I said, I'm selling the house next door. And they said, oh, does your buyer know that the, that property is one of the five that owns the common area for the neighborhood? And it turned out that there was four or five properties in the neighborhood that owned almost like a little park.
Uh, they had to maintain it, but it was such a cool little extra amenity and I don't think we would've ever known, cuz I'm not sure the existing homeowner knew So, Be afraid to knock on some doors around the listing you're planning to buy and ask yourself a few questions. Does it make sense to make a decision as to whether or not you wanna buy based on whether or not you might like your neighbors?
I think so. This segment of the show is brought to you by the law firm of O'Kelly and Soar Hand. They are a full service law firm of 26 offices throughout Metro Atlanta. They specialize in res residential real estate closings, home purchases, refinances. They do title insurance and contract review. They can be reached by calling 7 7 0 4 9 7 0 0 0 0 7 7 0 4 9 7 0 0 0 0 If you are looking to sell your home.
Anytime in the next six months, we believe we can sell your home for $28,000 more than your neighbor sold their home for. Yes, you heard that right? There isn't really any gimmicks here. The reality is, is that most homes are not in the right condition to fix the hi. The fetch, the highest price. And we offer a process where we can get your home in the right condition, all without really any cost to you other than actually reimbursing us for the repairs that we make.
And I am very confident in saying I can sell almost any home in Metro Atlanta for $28,000 more than their neighbor sold their home for. If you want more information, it's easy. Go to go get us radio. G O G A D D i S radio.com. Click on sale for $28,000 more put in just a little bit of information about yourself and your home and I will follow up with you personally.
Uh, have I been able to get every single person I've ever talked to $28,000 more? No. In some cases the houses are perfect to start with and we have a hard time helping them figure out how to get more. Money. But I will tell you, eight out of 10 times we flat out can get them $28,000 more than their neighbors sold their home for.
We're gonna take a quick break when we come back in our neighborhood spotlight. Ask Scott and Swanee is being featured Also, would you believe there are more American households today with pets than children and plants? You should never prune in spring. Stick with us. We'll be back.