Greg Burns of IPX1031 on two fast-growing 1031 trends: investors going passive, and parents whose kids become the tenants.

Greg Burns from IPX1031 stopped by my office this week. I've been working with Greg on my clients' 1031 exchanges for many years. His company, IPX1031, is the largest Qualified Intermediary in the country, which means they're the ones who hold the funds, handle the documentation, and make sure the exchange meets IRS requirements. He's always done great service, and I trust him with my clients.

I wanted him to share a couple of trends he's seeing right now because both of them could open up strategies you haven't considered.

Exchanging into passive investments

The first trend Greg is seeing is investors moving out of traditional rental properties and exchanging into passive investments through a 1031 exchange.

As property owners get older, a lot of them decide they don't want to manage real estate anymore. The tenants, the maintenance calls, the midnight emergencies. They've done it for years and they're ready to step back. But selling the property outright would trigger a significant capital gains tax bill.

A 1031 exchange lets them defer those taxes by exchanging into a different investment property. What's changing is that more investors are using that exchange to move into passive investment structures rather than buying another rental they have to manage themselves. They keep their money working in real estate without the hands-on headaches. Greg is seeing this at a pace he hasn't seen before, and it makes sense. The generation of investors who bought rentals in the 80s and 90s is reaching a point where they want the income without the work.

“More parents are using 1031 exchanges to buy properties where their kids pay fair market rent. Greg says he's seeing it at ten times the rate of anything in his career.”

Buying a property where your kids are the tenants

The second trend is one Greg says he's seeing at roughly ten times the rate of anything in his career. Parents are selling their traditional investment properties and using a 1031 exchange to buy a new property where their son or daughter becomes the tenant.

Here's how it works. You sell your investment property. Instead of exchanging into another rental with a stranger as your tenant, you buy a property where your son or daughter becomes the tenant. They move in and pay fair market rent, which is the key requirement. The rent has to be at fair market value. But assuming that box is checked, you've now got an investment property that's occupied by someone you trust, in a location that serves your family, and the exchange deferred your capital gains taxes on the sale of the original property.

It's a strategy that combines tax deferral, family support, and real estate investment into one move. Greg told me he's never seen this kind of volume on these transactions, and frankly, it makes a lot of sense for families in the right situation.

If you've been thinking about your options

If you own investment property and you've been thinking about your next move, whether that's getting out of management, helping a family member, or just exploring what a 1031 exchange could look like for your situation, I'd love to put you in touch with Greg. He's one of the best in the business, and I trust him with my clients.

Give me a call at 818-953-5300, email me at brad@bradkorb.com, or visit bradkorb.com. We're here to take great care of you. Talk soon, and bye for now.