What to Know About 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. What you need to know about starker exchange or 1031 exchanges is that it is a part of the IRS code wherein one is allowed to sell their investment property to invest in another property using the gained profit. What you need to know is that every amount that you have gained from selling your investment property must be re-invested. 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. There are certain things included in this process so as no one will take advantage of the entire situation. A good example of this is the so called 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. The closing date of the identified properties is done once you have closed the investment property you intend to sell; the time frame is usually 6 months.
You can almost use any type of property for 1031 exchange except those properties that serve as the primary residential home of the subscriber. If you are a first-timer in investment market then using 1031 exchange is something that you must highly consider. 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 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. Those are just the common things that you need to be aware of when dealing with 1031 exchange properties.
A number of people into real estate market make use of their gains in purchasing other things or for future use. The primary difference of acquiring properties through 1031 exchange and the conventional ones is that you can acquire properties without worrying about the tax. 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.