A powerful tool for investors nowadays is the 1031 property exchange. Not only it lets you swaps properties without paying any income taxes, but also it lets you swap any type of properties. Because of these aspects and the liberty IRS offers DST since 2004, 1031 real estate investments have become the most popular type of business. However, some do not know many about 1031 real estate. For those, we are here to provide some pieces of information that might convince them to use them in the future.
Every investor can defer taxes for unlimited time
Even though this type of investments is not completely tax free, one can freeze the taxes usually required for unlimited periods of time, even forever. However, for this to happen, you need constant investment and property swaps. Therefore, consider a long-term collaboration with a professional agency in the field to help you in these matters. Their experience and knowledge in the field will certainly help you freeze your taxes forever, without any other implications.
The replacement properties can be numerous
However, in term of procedures, they must be clearly specified, with full address, in writing, in a legal manner. All the parties involved in the process must also be notified. You can do this step by yourself, if you are the seller. However, a good advice is to hire a company specialized in these matters and let them handle the process. A real estate agent, accountant or attorney work just as well.
The money shall never pass through your hands
Because it is an exchange, you, as a seller or exchange subject, cannot touch the money. The moment you do so, they will become a subject to income taxes. Intermediaries like the companies specialized in like-kind real estate investments are a good alternative for you to benefit from the 1031 tax law. Let them handle the papers as well as the cash and you will be sure you can avoid the income tax.
The options are endless
Like kind does not mean you have to swap an apartment building with another one. Not the purpose of the properties in the key factor here, but their value. You can swap a hotel with a farm, a factory with an apartment building, if they are evaluated at the same amount of money. Moreover, if you want to add something new to your business portfolio, you must know the fact that you can swap a bigger property with two or more smaller ones. It is completely up to you, because the 1031 law is quite permissive.
Whenever you feel like you need a fresh start, consider this type of investments. They are easy to make with a little help from professionals. No income tax will be applied, it is quite flexible and many have found this is a convenient and easy way to make business. Find the best agency to help you in this way and maybe you will have a long and beautiful collaboration.