1031 MN

What Is A “Starker” Exchange And How Did It Get It’s Name?

Many people already know that there is a lot of money to be made in real estate investments. The thing is though, many people are a little shy about getting involved because of the amount of money that is required. Not only does a person have to have a little chunk of money to use as their start up, but there are also a lot of tax issues to deal with. Luckily, though, there is the starker exchange that can save you a lot of time, frustration and money. If you are planning to begin a real estate investing career, it is important to make sure that you are familiarizing yourself with the starker exchange so that you can make the most out of your investments.

Many people have heard about some tax breaks or deferments when selling and purchasing investment properties, but do not clearly understand how it all works. What most people would be referring to would be the 1031 starker exchange. This is not something that automatically happens for people. You have to qualify for the starker 1031 exchange as clearly stated on http://www.IRS.gov and make sure that you are meeting deadline qualifications.

If you want a brief understanding of how the exchange works, it is rather simple. There are two basic types of property exchanges, one that is immediate and one that is delayed. The delayed exchange, otherwise known as the starker exchange, is what most people look to take advantage of just because of convenience most times. The “starker” name came from the court case that established the rules and laws regarding this delayed exchange. It was in this court case that it was decided and a Qualified Intermediary has to be used which does come at a price. It is generally around five hundred dollars or less for the first time you have to use the Qualified Intermediary and less than that for each time thereafter.

But what is the purchase of the Qualified Intermediary? This is the person or company used to hold the proceeds of a sale until the seller takes possession of new property. It is an escrow account basically. This ensures that the proceeds from the sale of the property are truly being used towards the purchase of another real estate investment property and not something else. If the seller ay any point takes possession of any of the proceeds, the status of the tax deferral is then disallowed.

It is very important to note that there are very strict rules and guidelines that come with the 1031 starker exchange. Once you sell your property you have exactly forty five days to notify the Qualified Intermediary of the property that it is being exchanged for. This notification must be done in writing and it cannot happen after that forty five days. If too much time passes, you will find that you are no longer qualified for the 1031 starker exchange. There is no going back, no matter what the reason was for becoming late identifying or purchasing the new property or properties.

You also want to note that these forty five days includes holidays and weekends. So if your forty five days ends on a Saturday, you are not given until that following Monday. There are no exceptions or chances to bend the rules. And the forty five days rule is not the only timeline you will face when dealing with a starker exchange.

You actually only have one hundred and eighty days from the sale of the property you relinquished to completely purchase the replacement properties. If you run a hundred and ninety days, you are disqualified for the starker exchange on that set of properties. This means that you are faced with the taxes that you were trying to defer in the first place.

Another quick tip that might help you out is that your replacement for the property you sold can actually be more than one property. You just have to make sure that combined, they equal the value of the property you sold, if not more. There is the three property rule though which states that you can only identify up to three placement investment properties for the purpose of the exchange. For those who only want to purchase one, you still might want to identify at least two properties during that first forty five day deadline. This way, if the purchase of one property falls through the cracks, you will not be left empty handed and without a change at the 1031 starker exchange.

These guidelines are clearly laid out on the government’s website. Simply look into the Starker exchange and you will find all of the guidelines, rules and timelines laid out for you. All you have to do is do a little bit of research and you will find all of the information you need. Just make sure that you are learning everything there is to know about the 1031 starker before you sell that first property. Since you will be faced with strict timelines, you want to make sure that you are not wasting any time. Read everything you can on the starker exchange and consult a real estate attorney if you have to. After going through the process once, you should have no problems doing it again with little help.

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