Tips on a successful 1031 exchange for real estate investors

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Tips on a successful 1031 exchange for real estate investors

Do you know what it takes to a real estate investor to achieve success? You have to be consistent in your strategies, and to work with professionals, to be sure that you are able to run a profitable business. In addition, you have to assess the market requirements, because you have to know exactly what customers need, and what their buying patterns are. In case you notice that your customers are located in an area different from where you have your company established, you might think of moving your headquarters, but this would imply some additional costs and you might not afford it. Do not worry, because in this situation you have the possibility to ask for the help of a DST company, to offer you advice on how you should act, and what steps are important in the process. Here are some tips that would prove very helpful when you would use a 1031 exchange.

 

Make sure to meet the IRS requirements

When choosing a 1031 exchange for your commercial property you would have no loss or gain. You would not have to change it with the same type of property, because it is important for both of them to be used as business or investment locations, so if you want to exchange your office, it does not mean that you would have to find another office building for this. It is important to be an investment property. When the transaction is done within the 1031, you would have to pay a limited tax or no tax at all. In addition, there is no rule, which states how frequently or how many times you can change your investment properties.

Actions you are allowed to do

When you opt for this exchange, you have to sell your investment property, and not one of your personal residences. In case you want to swap your commercial property with the hope you would be able to use the other one as your residence, you should know that you would not be eligible for the exchange. When it comes to the type of property you would exchange you should know that they have to be of the same kind, which means that they have to be real estates. Make sure that you choose your new property in the established deadline, and all the other time frames are met.

Things you are not allowed to do

If you want to have a successful exchange, then you should make sure that you avoid the following situations. Check the list of actions the IRS state that come within this exchange, because some of them are not eligible. For example, you cannot exchange a property that you intend to resale, or which is stocked in trade. You would also not be able to exchange notes, bonds or stocks. The certificates of trust, interests in partnership or beneficial interests are not falling under the 1031 exchange. For being sure that you are doing things correctly, you should ask for the help of a professional company.