The real estate market gives investors the opportunity to obtain great profits, but it also has its downsides, one of them being the high taxes that need to be paid whenever a new property is being purchased. Well, nowadays, you have the possibility of resorting to a program that allows you to defer those taxes – 1031 exchanges. This program allows you to swap one of your properties with someone else, without either of you being required to pay any taxes. However, in order to benefit from all the benefits that an exchange can offer you, you need to be documented on the topic. Here are a few relevant things to know about the 1031 exchange real estate program before actually entering the process:
What does not quality for a 1031 exchange?
The first question you need the answer to is what qualifies for an exchange and what does not. Any building or property that is being used for investments, businesses, or trades will be eligible for an exchange. Those properties that are used as primary residences will not be able to apply for this program, however if there is a portion of the property that has as purpose trades or business affairs, the building might qualify for a swap. You need to read the rules of 1031 exchanges with care before applying, to make sure you fit all rules and regulations.
You will need a third party
The entire process of swapping two properties needs to be coordinated by a third party, referred to as the facilitator, who has no connection with either property owners. Even if this aspect might seem an inconvenience, having someone supervise the entire process can be quite useful. Because this is the first time using the program, you probably lack expertise on the subject, so the expert you will be hiring can provide you with all the relevant details you need, and will also make sure you have all documents in order. Even the smallest mistake can prevent you from successfully exchanging the properties, so having a specialist by your side will be more than necessary.
Where can you find a facilitator?
Finding the third party you need will not be difficult at, considering the impressive variety of options you will come across. However, to make sure the process is as inconvenience-free as possible, and everything goes as planned, make sure to collaborate with an experienced and trustworthy company. You should research their reputation properly in advance, and find out with how many other investors they have collaborate in the past.
If you wre looking for a way of deferring taxes, while still continuing with your real estate investment business, then 1031 exchanges are a great solution to opt for. Now that you know more information on the topic, you can begin the procedures of swapping properties. Remember that you will need a third party to supervise the entire process and provide you with the professional support you need, so search for a reputable company that can provide you with this kind of services.
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