1031 Exchange
A 1031 Exchange is a somewhat complex real estate buy/sell option that helps people defer capital gains taxes when they want to re-invest. There are very important considerations if you’re considering using this form of transaction, and you need an agent who has done these and knows their benefits and pitfalls.
Read below to understand the basics or call us, we’ll know where to start.
Why complete a 1031 Exchange?
The 1031 Exchange allows investors to defer taxable gains, and ideally re-invest that equity into another property that will outperform the existing property. A 1031 investor can carry forward the amount of taxes you would have paid, which provides additional purchasing power to invest in one or more new investment properties.
What are some of the benefits of a 1031 Exchange?
- Improve cash flow
- Level up by buying a better building or moving to a better area
- Consolidate multiple properties into one, easier-to-manage property
- Move from one property to multiple properties
- Diversify your portfolio
- Enjoy additional depreciation
- Go from being a hands-on-property manager to a hands-off investor
- Retire with maximum income from your property
What are the main requirements of a 1031 Exchange?
- When you sell a property, you must then purchase another like-kind investment property.
- To avoid all taxes, the replacement property must be of equal or greater value than the net selling price of the original property.
- All of the proceeds from the sale of the original property must be re-invested.
- When purchasing the new property or properties, the ownership configuration must be owned by the same title holder(s) and taxpayer(s).
- The new property has to be identified within 45 days, and it must be purchased within 180 days.
- The transaction should be administered by a qualified intermediary like (but not limited to) a Centennial Advisers broker.
Case Study
A Third Generation Property Owner Decided It Was Time to Sell
Mark Goldman’s family business was started by his grandfather and Mark and his brothers had worked in the business their whole career. But they would need to sell the property in order to meet the financial goals for retirement.
