A number of people love the idea of having an investment property but if time comes wherein you want to invest in another property by selling you’re the latter then you must consider 1031 exchanges. 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. 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.
After selling the property, you are given 45 days to identify the property or properties that you intend to purchase using the proceeds. Now, to make sure that no one will take advantage of the situation certain precautionary measures are included. A good example of this is the so called 95% Exception rule. The rules states that whatever property you intended to purchase you must get 95% of it. 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.
The properties involve in 1031 exchange must be classified as investment properties and not the primary residential area of the user. The use of 1031 exchange is a good kick off for those who are first-timers in the investment market. If you want to be acquainted with the entire guidelines of these 1031 exchange and also with the 1031 investment properties the checking things out in IRS web page is necessary. 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. Those are just the common things that you need to be aware of when dealing with 1031 exchange properties.
Most real investors make use of their money in other things or they usually keep it for future usage. If you are to compare 1031 exchange and the usual buy and sell procedures of real estate properties, its primary advantage is its non-taxable aspect. This is really something beneficial on your part since the IRS will not bother you as you go on with the selling procedures.