Posted by Frank Chin on February 24, 2001 at 06:30:25:
Many real estate investors keep their investments till their death, and it then goes to their heirs. Due to the so called “stepped up” basis, the heirs can sell the property with no capital gains tax due, if sold immediatley. If sold later, the basis for calculating gains is the value of the property at the time of death. They pay estate taxes though.
The heirs can also keep it, pay no capital gains, collect the rents through their lifetime, and will it to their heirs.
Another strategy is to keep doing the exchanges till you have a good cash cow - then instead of selling the property, keep it and refinance out to buy other properties.
In our case, we have two and three family houses here in New York City which is difficult to hire professional management. The wife wants to move to a warm climate in a few years. We’re looking for larger commercial properties to move the equity into through 1031 exchange where we can hire property managers. If we succeed, we can then refinance out to buy other properties later on without doing a 1031 exchange.
Of course - it’ll be simpler if we do a 1031 exchange for a property down south. Unfortunately, the wife and I was never able to agree on a locale to move to. Ideally, it should be one where we can profitably do Real Estate.
Hope this answers your question.