If you have plans on selling your investment property and invest its profit to another property the 1031 exchanges is your best option. 1031 exchanges also known as starker exchange is a section of the IRS code wherein the government allows you to sell your property to reinvest its profit into another one. What you need to know is that every amount that you have gained from selling your investment property must be re-invested. The number of properties where you invested the entire amount of the sale will not matter; you just really need to invest everything that you gained from it. There must be a company that will hold the funds generated until such time that a “like-property” is found and the entire funds will be released for the sale to be complete.
The moment you sell your investment property you are entitled to name those properties or the property you intend to buy using the proceeds, usually the time frame intended for this endeavor is 45 days. Now, to make sure that no one will take advantage of the situation certain precautionary measures are included. A good example of this is the so called 95% Exception rule. This is called 95% rule since the seller of the investment property must get 95% of what the property they intend to purchase. Another rule that you must keep in mind is that if the sale property closes, you are given 6 months from the date to close on those properties you intend to purchase.
You can almost use any type of property for 1031 exchange except those properties that serve as the primary residential home of the subscriber. The use of 1031 exchange is a good kick off for those who are first-timers in the investment market. If you want to be acquainted with the entire guidelines of these 1031 exchange and also with the 1031 investment properties the checking things out in IRS web page is necessary. This will also allow you to know the list of possible intermediate companies that you can deal with and some vital information about these properties too.
A number of people are into buy and sell of real estate properties without reconsidering the numerous advantage of using 1031 exchange that the IRS provide to them. The things mentioned earlier are just the basic things that you need to know about these exchanges.
People in the real estate business have different reasons when it comes to the manner by which they intend to use the gains in their properties, they can use it to purchase things or for future use. The primary advantage of a 1031 exchange is that it’s non-taxable in other words you don’t need to pay any taxes compared to the normal procedures done in selling and purchasing new properties. If you are able to sell properties and acquire one without the IRS bothering you then that would be very advantageous, don’t you think?