1031 Exchanges – Ideal Move for Investors
Investments properties can either be a rental property or something that is sold to another buyer, now if you want to sell your investment property to re-invest then a smart move would be to go for 1031 exchanges. 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. The number of properties where you invested the entire amount of the sale will not matter; you just really need to invest everything that you gained from it. Before the sale can be completed, there will be a company that will act as the one that will keep all the funds until a “like-property” is found.
After selling the property, you are given 45 days to identify the property or properties that you intend to purchase using the proceeds. 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. 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.
The properties involve in 1031 exchange must be classified as investment properties and not the primary residential area of the user. 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 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.
Most real investors make use of their money in other things or they usually keep it for future usage. 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?