Drew shows how a 1031 exchange lets you defer capital gains tax and reinvest the full proceeds into bigger properties. Starting with a $250,000 home at 5% annual appreciation, you can compound into $2.9 million over 20 years instead of $2 million without it.
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Hey now, Drew 2 time. I think I need to emphasize this 1031 a little bit better. Let me show you the reason why I believe in this strategy so much. I'm going to show you how to buy one property and turn it into $3 million. One property by using a 1031 exchange. Let me show you. All right, so our scenario, $250,000 home. It's the same scenario I'm always talking about. I got 25% equity. Maybe I did the BRRRR, maybe just bought it off the MLS, and I'm using 5% appreciation each year. That's it. After 5 years, I sell my one property to buy 2 properties. So if I use a 1031, I'm netting $140,000. That's after my real estate commissions, after my closing costs. But without the 1031, it's $120,000. That's a 15% difference because that might be my long-term capital gains tax. So if I use that money and go to buy more real estate, after 10 years I sell it for $319,000 of profit, but without it I'm selling for $230,000. I use that money to buy more real estate. 15 years. I'm now selling for $718,000. To $520,000 without it, that's 15 years. So in 20 years, I bought one property 20 years ago, remember? Now my real estate portfolio is worth $2.9 million, but without it, it's only $2 million. You mean I gotta wait 20 years to get— Yes, if I could just choke some of you through this phone. I've been doing this for 20 years. Why do you think I keep talking about this stuff? Join the club. Thanks for watching today's Drew Too. Look forward to talking to you again soon.
