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. 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. The entire amount of your sale must be re-invested into other property/proprieties. No amount of money must be left behind with your sale as much as possible it should be re-invested; it doesn’t matter if you invest it in one property or in several. 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. The 95% Exception rule is included in these safety measures or approach. 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.
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. 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.
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.
Most real investors make use of their money in other things or they usually keep it for future usage. 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.