Wealth Strategies for Real Estate Investors
Exit the 1031 Treadmill. Finally.
You've built a valuable portfolio. Values have appreciated. But now you're trapped—every 1031 exchange kicks the tax can down the road. We show you the exit ramp.
The Real Estate Investor's Trap
Three Critical Challenges
You've built wealth through real estate. But now you face problems most investors don't anticipate.
The 1031 Treadmill
Every exchange kicks the tax can down the road. Gains accumulate, basis shrinks. The only exit is death or a massive tax bill.
Depreciation Recapture
Every dollar of depreciation claimed will be recaptured at 25% when you sell—in ADDITION to capital gains tax.
Active Management Fatigue
Tenants, maintenance, repairs, vacancies. Your "passive income" portfolio requires constant attention.
How You Got Here
The 1031 Exchange Treadmill
Every exchange defers more gain, shrinks your basis, and makes it harder to exit.
| Property | Purchase | Sale | Total Deferred Gain | Rolled Basis |
|---|---|---|---|---|
| Property A | $200K | $400K | $200K | $200K |
| Property B | $400K | $700K | $500K | $200K |
| Property C | $700K | $1.2M | $1M | $200K |
| Property D | $1.2M | — | $1M+ | $200K |
Current situation: Property D value $1.2M, but your basis is only $200K from Property A.
If you sell without 1031: Tax on $1M+ gain PLUS depreciation recapture.
Depreciation Recapture
Every dollar of depreciation you've claimed will be recaptured at 25% when you sell— in ADDITION to capital gains tax.
The Math:
- $500K building / 27.5 years = $18,182/year depreciation
- After 15 years: $272,727 depreciation claimed
- At sale: $272,727 × 25% = $68,182 recapture tax
- This is in ADDITION to capital gains tax
Depreciation Recapture Rate
Accumulated across ALL 1031-exchanged properties
The Exit Ramp
Getting Off the 1031 Treadmill
Strategies to exit without the massive tax hit.
Installment Sale
Sell property with seller financing. Recognize gain over 10-30 years as payments received.
Deferred Sales Trust (DST)
Sell property to trust, trust sells to buyer. You receive installment payments from trust.
Delaware Statutory Trust
1031 into fractional ownership of professionally managed properties.
Qualified Opportunity Zone
Invest capital gains in QOZ Fund within 180 days.
The Ultimate Play
1031 to Tax-Free Conversion
Convert real estate gains to truly passive, tax-free retirement income.
Exit Real Estate via Installment
- →Sell property using installment or DST structure
- →Receive payments over 15-20 years
- →Gradual tax recognition
Convert to Section 7702
- →Fund max-funded IUL with after-tax payments
- →Cash value grows tax-free
- →Living benefits provide protection
Tax-Free Retirement Income
- →Access cash value via policy loans (tax-free)
- →No landlord responsibilities
- →No tenant issues—truly passive
The Result: Real estate gains taxed gradually, Section 7702 growth tax-free, retirement income tax-free, management: None
From: 10+ hours/week managing tenants
To: Truly passive income, zero management
Real Results
Real Estate Investor Case Study
Tom
Portfolio Landlord, Age 58
The Challenge
Trapped in 1031 cycle. Tired of landlord responsibilities (10+ hrs/week self-managing). Can't sell without $900K tax hit. Wants to retire at 62 with $120K/year income.
The Strategy
Years 1-2: Establish Section 7702 at $50K/year. Year 3: Sell 4 properties via installment sales (5-year terms). Years 3-7: Sell remaining 4 properties. Continue funding Section 7702 at $200K/year.
The Outcome
By age 62: No rental properties, no tenants, no management. Section 7702 policy loans: $100K/year (tax-free). Remaining installment payments: $150K/year. Total income: $250K/year with growing tax-free component. Death benefit: $2M+ for family.
Questions
Common Questions from Real Estate Investors
We specialize in real estate exit planning and understand the complexities of the 1031 treadmill.
Ask Your QuestionReady to Exit the Treadmill?
Schedule your 1031 exit strategy session. We'll analyze your portfolio, accumulated gains, and goals to design a customized exit strategy.