1031 Exchanges – Ideal Move for Investors
If you have plans on selling your investment property and invest its profit to another property the 1031 exchanges is your best option. 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. 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. 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.
The moment you sell your investment property you are entitled to name those properties or the property you intend to buy using the proceeds, usually the time frame intended for this endeavor is 45 days. Now, to make sure that no one will take advantage of the situation certain precautionary measures are included. A good example of this is the so called 95% Exception rule. The rules states that whatever property you intended to purchase you must get 95% of it. 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.
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. There is also a list of intermediate companies that shall hold the funds of the investors along with accurate information about this exchange.
It is vital to know how advantageous these 1031 exchanges are rather than settling with the buy and sell of properties. The things mentioned earlier are just the basic things that you need to know about these exchanges.
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 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.