Today one of our clients made another step towards retiring from his real estate investments. We closed on 150 Summer St a six-unit building in Malden, Mass. When we first sat down with this owner he was stuck. He knew he had to sell, his life plans don’t include collecting rent forever. After 20 years or more he was more than ready to retire. The problem was… you guessed it TAXES.

He has owned his buildings for so long and his basis was low that he was going to get creamed in taxes. Basically Uncle Sam and the Governor together were going to show up and wipe out 20% or better of all he has earned.

When you’re a real estate investor most of your wealth in the world is in your real estate, that’s just the way it is. I have yet to meet a wealthy real estate investor who has his wealth diversified in any significant way into stocks and bonds and the like.

Back to our client’s dilemma… how to keep his hard-earned equity where it belongs - working for him in his retirement. What we did was show him how a little known change in the tax code, made in 2002, would allow him to retire from his real estate investments without paying any taxes.

There are basically three ways you can do this. Each one is for a different investor.

This client decided that he’s a believer in real estate, so he moved his money into a “tenant-in-common” or TIC. He used the 1031 tax deferred exchange and got into a much larger, commercial investment property where he doesn’t have to worry about management or vacancies or anything else. All he has to do is cash the checks - every month.

There are so many options available to the savvy investor, this is just one. When the time comes don’t assume you have to pay the tax. Investigate your options.