Back To Basics: Everything You Need To Know About 1031 Exchange

Flipping properties is lucrative, and property investors can make a hefty living by flipping homes. Flips may be sold for immediate paychecks or held longer to generate rental income. When an investor sells their investment property, they should take advantage of the 1031 exchange to avoid hefty taxes and protect profits.

What Is A 1031 Exchange?

The 1031 exchange provides an opportunity for investors to defer paying capital gains taxes by swapping one property for another. This allows them the flexibility and convenience of transferring their investment onto new property. Deferring capital gains tax on your investment property is a great way to get richer without working. During the process, you will use any money earned from it in order purchase another like-kind piece of real estate which can then be used as leverage for even more earnings. With 1031 Exchanges, investors can defer their capital gains until they sell off the new properties.

Benefits

The 1031 exchange offers a multitude of benefits to real estate investors who decide take the time and effort, not only in order for them but also their properties too. Some key benefits include deferring taxes on capital gains from selling their investment properties, this amount can be used to purchase a new property, and the exchange can be used to get rid of poorly performing investment properties. Using capital gains from one property to purchase a like-kind is an excellent way for investors to expand their investment opportunities.

How Get A 1031 Exchange Going

In order to enjoy the many benefits of this process, investors must ensure they pay close attention to timing. In fact-it’s critical when it comes time for you 1031 exchange your properties with like kind ones. The investor must close on the new property within 180 days of sale. In order to invest in like-kind properties, you need your original investment and then buy another one that is also similar so they can be combined for tax purposes.

Finally, the four types of 1031 exchanges require that you purchase your replacement property for an amount at least as high (or higher) than what was paid on any previous properties. In other words: You can’t use this strategy to get a cheaper price.

The Big Picture

Real estate investors have the opportunity to take advantage of a 1031 exchange if they want their Capital Gains tax deferred. But, this process also allows them access new investment opportunities with like-kind properties replacement in tandem.

It’s a challenge to find the right property that will work for an exchange in time, but you don’t have worry about it alone. A Florida Property Warehouse agent can connect you to local properties that meet your investment needs so you don’t have to worry about anything other than investing. We never charge subscriptions or fees, which means our earnings stay in the palm of your hands.

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