Anna

After owning a duplex in Cupertino for over 30 years, Anna had achieved what every investor aims for: steady income from an investment property that she owned free and clear.

But Anna had moved to Sonoma County and was ready to retire, and her retirement plan didn’t include being a landlord in Cupertino. Although the income from the duplex was significant, Anna wanted to diversify her investment portfolio and have cash in the bank. So she decided to sell the duplex, and her financial advisor introduced Anna to me.

As I got to know Anna, I could hear that she was ambivalent about selling the duplex – it was a solid investment for her and she had owned it a long time. Although she had considered buying an investment property closer to her new home, she worried about tying up the cash she needed to fund her retirement.

Once I understood her concerns, I offered her another option – a partial 1031 exchange. According to the tax rule IRC 1031, investors who sell a rental property can defer capital gains tax if they use the proceeds to buy another investment property. Anna knew about 1031 exchanges, but thought it wasn’t appropriate for her because she needed the proceeds from the sale to fully fund her retirement.

What she didn’t realize was that she could defer a portion of the capital gains tax by using only some of the proceeds to purchase another property – the rest she could take in cash. This solution allowed Anna to own a rental property and have cash on hand to spend and invest. This delighted Anna – she could have her cake and eat it too.

With that decision made, we were able to move forward with selling the duplex in Cupertino, finding an investment property in Sonoma County, and coordinating everything between the two. I introduced Anna to a respected real estate agent in her area, and went with them to help find properties that would meet our criteria for the exchange.

Pulling these two transactions together required an incredible network of help.  In addition to the talented specialists I’ve worked with for years, whose expertise and experience I bring into the process, I also needed to coordinate with Anna’s property manager, her financial advisor and tax planner, the real estate agent in Sonoma County, two title companies – plus her current tenants and the buyer of her duplex.

In less than 4 months, Anna sold her Cupertino duplex for a handsome price, using 38% of the proceeds to purchase a beautiful investment property closer to her home. Anna and her financial advisor put the remaining money to work and her retirement plan is now fully funded, allowing her to relax and enjoy her well-earned retirement.