1031 MN

What are the Qualified Property Types for a 1031 Exchange?

If you are already a real estate investor or you are looking to become one, you want to make sure that you are learning all the tips and tricks out there to make sure that you are using your money wisely. There is nothing worse than paying tens of thousands in taxes when you really do not have to at the moment. If there were better things that you could do with that money, wouldn’t you want to do it? With the 1031 exchange, you really do have a chance to make your money work for you, instead of having it work for the IRS. However, how is this possible?

With a 1031 property, you will be able to delay or defer taxes. This means that you can take the money that you would normally pay in taxes and apply that to the purchase of another investment property. But of course, as with anything else, there are some restrictions and guidelines that you will have to follow.

Once you read through them all, you should have no problem at all understanding just what it is exactly that you have to do. You want to make sure that you are looking carefully at two things such as the qualified property types and the timelines that you are working with. Even the most qualified property will not do you any good if you are not within the given timelines for the 1031 properties.

So just what is a 1031 property? To start with, it has to be an investment property. This is not a place you are calling “home”. This means that the property is used solely as an investment, a way for you to make money. Even though you cannot call it “home”, others can. This means that your qualified property could be a single or multi-family property that you have rented out, as an investment. The list of 1031 properties that qualify also include large apartment complexes that you own.

You have the 1031 property that you already own and that you are selling and then you have what is called the replacement property. This is what you are getting in exchange for selling the other property. This is not a trade between just two individuals or investors, although it can be. You can sell your first property to Mr. Smith and then purchase another property from Mr. Jones. It does not matter who is who, as long as the new property you are purchasing is valued at an amount that is equal to or greater than the property you are selling.

Even if the property is only valued at $30,000 more than the first, that is fine. In many cases, you can actually purchase several different 1031 properties that when combined, add up to be a value that is equal to or more than the value of the property you sold. This is a perfect option for those who want to diversify their portfolio and expand on their wealth.

Basically, you are improving your wealth by stepping up into a better investment. You have to use a third party to hold and transfer your money. You also have to use the equity gained in the property you sold to purchase the new property. Even though this may seem like you are not making out because you are walking away with tons of spendable cash in your hands, you real are. You will have increased your equity and your total estate worth. In the end when it comes down to it, you will have made a tremendous amount of money if you have been playing your cards right.

If you still find yourself confused about which properties are 1031 properties, you want to make sure that you are researching that information now. You do not want to wait until the very last minute. By doing this, you will find yourself in for a world of trouble because you just might miss out on the entire 1031 property exchange all together.

Within forty five days of the sale of your first property, you have to be able to name the property that you would like to purchase and include in your deal as a 1031 property. And then you only have one hundred and eighty days from then to make sure that the deal goes through. If your IRS taxes are coming up due sooner than one hundred and eighty days, that is the date you want to use as your due date for the 1031 property exchange.

Read up as much as you can about the 1031 property exchange so that you can make sure that you are getting the very best deal possible. Since the whole idea behind real estate investments is to make as much money as possible by spending as little as possible, this is a deal that you simply cannot afford to pass up. Go over all of the IRS guidelines for this tax deferment so that you are ready for anything that comes your way. The more prepared you are, the better luck you will have at getting the 1031 properties to work for you financially.