Brief yet relevant information about the 1031 exchange

If you have already been operating in the real estate industry for some time now, then it is high time you went from basic strategy to advanced ones. This means that you can forget about the simple sell-purchase processes, and start focusing on more complex solutions, such as the 1031 tax deferred exchange. This is a modern type of transaction experienced individuals who are working with commercial properties should try right away. So, if you have already owner a six unit apartment building in your city, you may want to consider this as your first step in the business. The 1031 exchange California provides multiple benefits you should take advantage of, so why not try? Here are some relevant pieces of information that will definitely

What is the 1031 exchange?

Briefly put, the 1031 (tax deferred) exchange for real estate is the sale of one investment property and the purchase of a new, similar one. An important thing you must know is that both real estate needs to have approximately the same value and the entire gains of the initial sale should be invested in the new purchase, which is aimed to replace the first one. Taking into consideration that the seller does not get any gains per se, the overall capital gains tax that comes from the sale is deferred forever.

Which are the most common types of 1031 exchange transactions?

Normally, all real estate exchanges are the same. However, if you are to classify them based on timing criteria, there are three kinds of exchanges: deferred, simultaneous and last but not least, reverse exchanges. As far as structure is concerned, there are two types of transactions deferred (including the reverse ones) and simultaneous. It is up to you what you choose, but you should also make sure the other party

Why is the 1031 so popular?

The main reason why this real estate practice is so popular is that it will help you increase wealth with every exchange. A recent audit has shown that while 15 years ago (in 2000) less than 110,000 1031 tax deferred exchanges had taken place, five years later, in 2015, the value has increase almost three times, namely there were 300,000 such transactions completed. Some years later, given the financial crisis and the international economic situation, as a result of falling home values and short sales, properties have retained and even increased in value. Due to this new trend and to the increasing prices of the real estate industry, it seems that experts foresee a bright future for 1031 transactions. Their number is likely to grow, as people are not willing to pay additional money on taxes, since they can simply eliminate this option. Another reason that makes the strategy so popular is that it gives individuals the possibility to find a matching property right away, with little effort and no additional costs. So, if you are willing to move on to the next stage of your commercial real estate business, you should try it too. s

 

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