1031 Exchange Properties

 

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A 1031 exchange is when you exchange one property for another, usually another property in the same state. It is not necessary for the properties to be in the same sector, though. For example, an investor can invest in an apartment building, but later exchange it for an industrial building. International properties are not considered "like-kind" 1031 exchange properties. In fact, a 1031 exchange is legal for almost any property in the United States. However, if you are planning on exchanging an investment property, be sure to make sure you aren't buying the wrong property at the wrong time.One advantage of a 1031 exchange is its ability to diversify your portfolio. It allows you to diversify your assets and property types. If you own a strip mall with two restaurant pads, you may choose to sell those to buy a $1.5 million strip mall in a better location. Without the restaurant pads, however, you would not be able to exchange your old property for a new one, so this option would not provide tax deferral. Click here to get 1031 exchange information.

 

The two restaurant pads are what create most foot traffic, making other retail pads in the strip mall viable. Once you've determined that you're eligible for a 1031 exchange, the next step is to identify your replacement property. It's best to find your replacement property while your current property is on the market. The reason for this is that a replacement property will typically cost more than the original property. Additionally, you'll be subject to capital gains taxes. By making the 1031 exchange with a qualified intermediary, you can be sure that the transaction will go smoothly. While many people will agree that the timing is crucial, there are still certain restrictions that need to be met. While the time period is short, it can be significant. 

 

During the time it takes to buy and sell a replacement property depends on several factors. For instance, if you're planning on selling your property, you must complete the sale within 45 days. This may not be enough time for a 1031 exchange, and the sale of your old property could result in a loss. The IRS also recognizes that the intent of a taxpayer to exchange a property is often different from the original. Whether a taxpayer intends to use the property as a primary residence, purchase a rental property, or fix up an investment property, the IRS recognizes a change in circumstance. Despite this fact, there are some situations where a property that does not qualify can be considered for an exchange with proper planning.

 

 A 1031 exchange is beneficial for real estate investors who want to expand their cash flow or consolidate their real estate holdings. To take advantage of the tax-free exchange, you must find a like-kind property and exchange it with it. A qualified intermediary will be able to help you with the paperwork. Make sure to be aware that the new property must be equal or higher in equity and fair market value. Also, the person on title of the new property must be the same person who owns the old one. Here is a post with a general information about this topic, check it out:  https://en.wikipedia.org/wiki/Venture_capital_financing.