The Advantages of 1031 Exchanges
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. 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.
After selling the property, you are given 45 days to identify the property or properties that you intend to purchase using the proceeds. There are certain things included in this process so as no one will take advantage of the entire situation. 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. 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. 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. 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.
It is vital to know how advantageous these 1031 exchanges are rather than settling with the buy and sell of properties. Those are just the common things that you need to be aware of when dealing with 1031 exchange properties.
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. If you are to compare 1031 exchange and the usual buy and sell procedures of real estate properties, its primary advantage is its non-taxable aspect. 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.