What to Know About 1031 Exchanges
A number of people love the idea of having an investment property but if time comes wherein you want to invest in another property by selling you’re the latter then you must consider 1031 exchanges. 1031 exchanges also known as starker exchange is a section of the IRS code wherein the government allows you to sell your property to reinvest its profit into another one. 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. This is called 95% rule since the seller of the investment property must get 95% of what the property they intend to purchase. Another rule that you must keep in mind is that if the sale property closes, you are given 6 months from the date to close on those properties you intend to purchase.
Almost all types of properties can qualify for a 1031 exchange except those used by people as their primary residential place. Most of the time 1031 exchange is perfect for those who are just starting out as investors in this kind of market. If you want to be acquainted with the entire guidelines of these 1031 exchange and also with the 1031 investment properties the checking things out in IRS web page is necessary. This will also allow you to know the list of possible intermediate companies that you can deal with and some vital information about these properties too.
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.
People in the real estate business have different reasons when it comes to the manner by which they intend to use the gains in their properties, they can use it to purchase things or for future use. The primary advantage of a 1031 exchange is that it’s non-taxable in other words you don’t need to pay any taxes compared to the normal procedures done in selling and purchasing new properties. This is the main reason why many people are into IRS exchange and why people think of it is the next big thing in the upcoming years in the real estate market.