The Advantages of 1031 Exchanges
If you have plans on selling your investment property and invest its profit to another property the 1031 exchanges is your best option. In 1031 exchanges you are given the chance to re-invest what you have earned from your investment property in accordance with the guidelines stipulated in the IRS code. The entire amount of your sale must be re-invested into other property/proprieties. It doesn’t matter if you invest the amount in several properties so long as the full amount gained is re-invested in other properties. In this matter, there would be a middle man or a third party that will hold the entire funds until one is able to find a “like-property” where the funds will be released and entire exchange will be completed.
The time it takes for you to decide on which properties to purchase using the profit of the investment property you are selling is 45 days. Now, to make sure that no one will take advantage of the situation certain precautionary measures are included. One the things included in this is the 95% Exception rule. In this ruling, you must get the 95% of the entire property that you initially want to purchase. You have six months to close those identified properties you have, this will be done right after you have close the investment property you are selling.
Almost all types of properties can qualify for a 1031 exchange except those used by people as their primary residential place. The use of 1031 exchange is a good kick off for those who are first-timers in the investment market. It is also vital on your part to check on the IRS web page if you want to know more about 1031 exchange rules as well as the 1031 investment properties. This is also a good way to be acquainted with the best companies that can act as the third party of your 1031 exchange endeavor.
A number of people are into buy and sell of real estate properties without reconsidering the numerous advantage of using 1031 exchange that the IRS provide to them. Hopefully, this article was able to give an overview of the benefits one can get from 1031 exchange properties and how they work.
A number of people into real estate market make use of their gains in purchasing other things or for future use. If you are to compare 1031 exchange and the usual buy and sell procedures of real estate properties, its primary advantage is its non-taxable aspect. If you are able to sell properties and acquire one without the IRS bothering you then that would be very advantageous, don’t you think?