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Buying Terranea Real Estate and the Benefits of a 1031 Exchange

A Q&A with Terry Niemann, Terranea Real Estate’s Director of Sales & Marketing

With the continuing popularity of owning a second home within close proximity to major airports such as LAX, and with California oceanfront real estate being a safe haven for international buyers, The Villas at Terranea are a highly desirable option for real estate buyers seeking a smart investment.

From California beach homes to luxurious mountain cabins, investment homes are increasing in popularity and, as wealth builders seek ways to lessen tax implications, many are incorporating benefits of the I.R.S. code commonly referred to as the “1031 exchange” (pronounced ten thirty-one exchange) — a beneficial tax deferral exchange process used when acquiring and selling property.

Through 1031 exchange, Terranea Real Estate has sold several villas and casitas. We sat down with Terranea Real Estate’s Director of Sales & Marketing, Terry Niemann, to learn more about 1031 Exchange and The Villas at Terranea.

First, Terry tell us a bit about yourself.

I love my job with Terranea Real Estate and have been working with Two Roads/Destination Hotels & Lowe Enterprises since 2010, shortly after the Villas at Terranea were first available for sale. I am married with three adult sons and am a proud USC alum. As a local Palos Verdes resident, I know the area well, which is helpful in advising buyers.  We want all of our owners to feel excited, confident about & connected to their resort properties here.

Break down the basics of Terranea Villas.

Terranea Villas are fee-simple properties, meaning you possess the grant deed and title. You own it 100 percent, and can take title personally or professionally through an LLC or corporation. It is real property, so you can pass it down through generations, or sell it whenever you’d like. These 2, 3 & 4-bedroom villas are beautifully furnished, completely turn-key, and hassle-free with professional property management handled for you. Owners also receive extra Resort privileges and special discounts on dining, Spa & golf.  Several local owners enjoy using Terranea as their ‘country club’.

Terranea Resort manages your property for you, so it’s the world’s easiest getaway place to come and go as you please, up to 90 nights each calendar year, on your own schedule. When you’re not in residence, you make your villa available for other people to rent.  This leads us to the 1031 exchange conversation, because this is rental property.

Okay, now about 1031 Exchange. What is it and how does one go about taking advantage of what it offers?

This exchange process essentially allows investors to defer paying taxes on their property when it’s sold, but only if another “like-kind” asset is purchased using the profit made from that property. This is why it’s often referred to as a “Like Kind exchange.” It’s important to note that 1031 exchange is NOT solely for real estate, but it’s most commonly used in this regard. A 1031 exchange can also be used to defer paying taxes on other assets like artwork, a business or a car.

This exchange process has many benefits beyond its tax-saving advantages, especially as investors are wanting to shift their investment focus. For example, if you wanted to exchange a high-maintenance investment for a low-maintenance investment, you may not have to pay significant taxes to do so. You can also use it to move your investment locations without the IRS getting involved.

Do all real estate transactions qualify for 1031 Exchange?

No, not all real estate transactions qualify. Here are eight guidelines to determine if your transaction does:

  1. The property must be an investment, not your primary or secondary home.

  2. Additionally, both properties must reside within the United States of America.

  3. Properties that are designed for a quick purchase and resale do not count.

  4. Properties Must Be “Like-Kind.”

  5. The Replacement Property Should Be of Equal or Greater Value.

  6. Must Identify the Property you plan to buy within 45 days.

  7. Must close within 180-Days.

  8. Finally, one of the most important rules governing the entire 1031 exchange process is this: You may not touch the money of the relinquished property if you hope to avoid the taxes!

Always consult your own financial advisor to see how this might benefit you. Learn more here and here and by talking with your Terranea sales advisor by calling 310.265.2888, emailing info@terranearealestate.com or getting in touch with your tax professional.

How can guests at Terranea Resort get a private tour and presentation of the Villas at Terranea?

To schedule a private tour of the Villas, and discover how you can own a beautifully furnished beach house/rental property, please contact Terranea Real Estate by stopping by our real estate office next to marea, call 310.265.2888 or email info@terranearealestate.com to schedule a time.

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