Discovering The Truth About Listings

Understanding 1031 Exchanges

Let’s dive in and look at the 1031 Exchange. First let’s explore what a 1031 Exchange can do for you Is 1031 exchange something you can take advantage of? Here is a breakdown, you can decide for yourself. Let’s take a look.

What is an exchange? 1031 exchange is a section of the IRC. Within the time guidelines among others, a properly structured 1031 Exchange lets investors defer capital gains when reinvesting in a second property after the sale of another.

Let’s wrap our heads around the power of 1031 Exchanges.
The Essential Laws of Calculators Explained

Only $65,000 would be left after capital gains of 100 thousand dollars assuming about 35 K in combined taxes.
The Essential Laws of Calculators Explained

Assuming industry average of twenty five percent down with loan to value ratios of seventy five percent, would limit the buying potential of property B to only $260,000.

Assuming similar ratios, a 1031 Exchange would allow the investor the entire $100,000 to reinvest, resulting in buying potential of $400,000 for property B.

Protection from capital gains is the hallmark of 1031 Exchanges. Make sure you or your financial consultant understands all the terminology in 1031 exchanges. Using a free capital gains calculator you can find online, see if a 1031 exchange is right for your needs.

Much due diligence is necessary prior to executing an exchange. If taxes are not your strong suit, use a professional tax person or real estate expert to determine it’s viability.

Don’t procrastinate following the sale of the first property, 1031 exchanges have time limits. Exchangers are limited to 180 calendar days or whenever they file taxes, whichever comes first. Executing a 1031 exchange right after you filed your taxes is recommended, allowing you the most time available to get property B. Look for help in your area from a tax specialist, realtor or financial advisor. Speak with other investors for recommendations of a professional in your area that has experience with 1031 exchanges. Good luck with your 1031 Exchange. Know the ins and outs of the real estate game, and take advantage of the benefits a program like 1031 exchange provides. Make sure to take your time and get it right, there is a fair amount of red tape associated with 1031 exchanges, take it slow and get it right the first time.

The IRC’s 1031 exchange allows investors to maximize their investment potential and expand their portfolio.