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. 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.
The time it takes for you to decide on which properties to purchase using the profit of the investment property you are selling is 45 days. 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. 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.
You can almost use any type of property for 1031 exchange except those properties that serve as the primary residential home of the subscriber. 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 is also a good way to be acquainted with the best companies that can act as the third party of your 1031 exchange endeavor.
There are several advantage in using 1031 exchange unfortunately not all people are aware of this matter. 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 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. This is really something beneficial on your part since the IRS will not bother you as you go on with the selling procedures.