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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. 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. There must be a company that will hold the funds generated until such time that a “like-property” is found and the entire funds will be released for the sale to be complete.

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 of course certain things included in this process so as to make sure no one will take advantage of it. 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.

The properties involve in 1031 exchange must be classified as investment properties and not the primary residential area of the user. 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 know more about these 1031 exchange guidelines along with the 1031 investment properties then the best thing to do is visit the IRS web page. There is also a list of intermediate companies that shall hold the funds of the investors along with accurate information about this exchange.

There are several advantage in using 1031 exchange unfortunately not all people are aware of this matter. The things mentioned earlier are just the basic things that you need to know about these exchanges.

A number of people into real estate market make use of their gains in purchasing other 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. 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?

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