The legitimately rich people don’t avoid paying their taxes – they don’t cheat them either. You want to know what happens inside rich people’s minds? One word – investments.
If you really want to increase your income, stop putting your money into a savings account. Saving money is good, but it won’t make you rich. Instead, devote your money into stable income-generating investments. In 2021, forbes.com posted some of the year’s best investment opportunities:
• Building Cash Reserves
• Stocks
• Real Estate
• Pay Down or Pay Off Debt
• Launch or Accelerate Retirement Savings Plan
• Side Businesses
In my research, investing in real estate has been included in the list of the best investment choices of every year. Chicago presents some of the best investment opportunities in the East coast. It has a bunch of urban areas due for development, which means that the value of properties in these places will soon rocket.
Investing in real estate is a strategy. Everyone is welcome; it’s that big of a scale. And if you’re in the business of commercial real estate, be sure to explore 1031 exchange. It’s a simple tactic to keep your money in the game. Simply put, 1031 exchange is a way for investors to exchange investment properties to defer capital gains or losses or capital gains taxes. There are companies out there that facilitate these types of deals. Hiring these companies lessen the hassles on your part, but be prepared to pay them off from a portion of the sale. Here’s how 1031 exchange works – buy a building for a million dollars; five years later, sell the same building for a couple million. Easiest million dollar profit, you just have to wait!
Now, what would you do with the extra million you made? The way I see it, you either choose one of these two options:
Option 1 – After you pay the 40% capital gains tax; buy a nice house for your family for 400,000 dollars, buy two new cars for 100,000 dollars. That will leave you with at least 100,000 dollars, BUT you’ll also be gaining liabilities. And as we all know, banks have a thing for liabilities. As time pass by, your property taxes explode, you won’t be able to afford to buy anything and lose everything.
Option 2 – Put the million dollar profit you got from the 1031 exchange so you don’t pay capital gains. Re-invest the money in a property that has equal value or more than the previously bought building to show growth over time and gain the equity of a two million-dollar building. Fix up the property and rent it out to create a positive cash flow. The property now has turned into an asset. Now, if you go to the bank and ask for a loan, you shouldn’t have a problem. They might even talk you into asking them for money for your next multi-million dollar project! And if everything goes really well, the city might even throw you a couple of thousand to help you fix up the building if located in an opportunity zone.
There are other ways to avoid or reduce the cost of taxes; but in the commercial real estate business, the 1031 exchange is the most legit and legal way to keep your money in play.
Want to know more? Read "Did You Know These Chicago Real Estate Secrets?"