The Top Secret Tip Every Real Estate Investor Needs to Know

Unfortunately, a lot of real estate investors miss out on a truly great money making and portfolio building opportunity, simply because they don’t know the tried and true secrets of a 1031 exchange. Using this tax code, investors are able to sell their assets and then hold off on paying all taxes on the money they make. Using the exchange, the investor simply has to sell some investment real estate and then buy another piece of property at greater or equal value. This will allow the investor (you!) to defer all of your taxes and keep your money. You can then turn around and reinvest the cash, which allows you to build your real estate portfolio. If done correctly, it’s truly a win-win situation for all involved.
Before embarking on this process, however, you need to better understand how it works. First of all, you must understand that not every property counts as “investment real estate.” Properties that qualify include any properties used for business, meaning property that you make money off of owning or use to make money, such as an office building. If you ever have any doubt about whether or not a specific property counts, make sure that you seek professional advice before going ahead with the exchange. Under the 1031, this real estate will be considered “exchangeable,” meaning that you can trade in the property for other commercial property. You can even buy several replacement properties from the sale of one property if you so desire.
You will have to use a qualified intermediary to help oversee and run the exchange. This person will be responsible for preparing the exchange agreement and overseeing it as well. You will need to hire this professional before closing on the property you are selling. Ideally, you would even consult with this person before you ever make your first move. Then you will have to find an exchangor. This person will find and indentify the replacement property within 45 days of the closing of the first property. This means that he or she will be required to list the properties and then send them to the qualified intermediary. After closing is reached on the first property, the exchangor will have 180 days to close on a replacement property. Meeting the deadlines of the process is extremely important and often makes the difference between a successful venture and an unsuccessful one.
Of course, this all sounds very simple and, for the most part it is. However, there are some difficult parts to completing a 1031 exchange if you’re not qualified or experienced in this area. For this reason, it is in your best interest to speak with a tax advisor and a qualified intermediary before going ahead with the exchange. If you and the people you have enlisted to help you act smartly and knowledgeably, you will be rewarded with a strong investment portfolio and a great opportunity for making extra cash.

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