me and my partner are fixing to start buying properties.we are both realtors and have cash flow.I know how to analayze properties,holding costs,repairs,profit margins etc.what i want to know is say you are an investor and doing it full time with properties and you are flipping an 1031 exchanging them with an internediary at some point you have to be taking the profit out as living expenses,but any profit taking out will be taxed at 40% percent by the government,how do you investors get around this as i know they do 1031's all the time and take cash out but would not get cut 40% out of there profit.thanks for the help.joel (oh yeah by the way we were planning on setting up a land trust if that makes a difference)i am in ga

You seem to appear to have the general knowledge of how to analyze a property... but to effectively do so you must also have a plan including your exit stragity... even on properties you may plan to hold for Cash Flow.

Working with 1031's can save/ delay some tax situations but they are not always the only or best way to handle divestment of real estate in every case.

Most investors I know, and I'll include myself, use a mix of strategies. 1031's are great for properties your planning on holding for long periods of time but not always best for short terms unless your plan takes into consideration your overall business plan. 1031's can work in short term holds such as fix and flip if you goal is Capital acquisition for additional deals.... but as you indicate... taking out living expensed can be a taxing event that may make 1031's less attractive for some transactions.

Consider handling some as non 1031. One I use is to buy in distress... make repairs... rent for a year or Lease/ Option and then exit using one of several procedures including traditional sales or, often better a Creative Real Estate Investment process such as Owner Finance with 3 or 5 year balloon, another L/O, HELO for extracting funds. During this time all expensed can be pulled from the rental income... decreasing the eventual tax bite. A good accountant is well worth the expense as long as they are very knowledgeable in real estate investments. A few of these can usually easily cover your living expensed while the property appreciates.

Georgia Land Trust laws are not the best in the country but I know of several investors who use them well.

You should consider setting up an LLC to hold the Land Trust's beneficial interest. Your Trustee also needs to be well selected since they will be doing the signing on all paperwork and you need some separation from them for privacy purposes... ie... not a relative with the same last name.... maybe a married daughter?? just make sure you know them and have easy access.

If your in the Atlanta area, a guy named Dykes Bodiford with Oak Tree Group is someone you may want to contact. He gives seminars showing how he uses Land Trust and LLC and even s-corps in real estate investments. He's well respected and is a very active investor.

Update

Mis spelled the name..

it is Dyches Boddiford...

Just got an e-mail from him this AM and he has signed on a Cruse Ship Seminar for real estate investors. The link is
http://assets101.com/mail/link.php?id=de8864bAPCruise

His was one of the better courses on Asset Protection using S-corps, LLC's and Land Trust I have seen..... and I started using it over a year ago, for myself and clients.

Could be a great business trip/vacation/ write off!!

I'll have to pass but I think I know a couple of other agents from central florida and a few investors that will be on board. Check it out if you wish...