1031 Properties - What You Need to do it Right

1031 Properties - What You Need to do it Right

If you are considering 1031 properties for your investment efforts, you are on the right path to some potentially serious investment income in the future. More importantly, you've found a method to leverage your investments as they grow without paying stiff taxes for capital gains as you sell one property in order to raise the funds to invest in another.
If you are like most people, there are more question marks when it comes to 1031 properties than there are answers. What do you need to make sure you get it right?

The Right Stuff for a 1031 Investment

1)The properties you purchase cannot be residential. They must be business or investment properties. The 1031 tax deferral cannot be used with vacation homes either. It must be a property that is going to be used for investment purposes. This doesn't work on a property that is purchased to sell or to "flip" either. 2)You must have a Qualified Intermediary (often referred to as a QI) when using a 1031 exchange. If you fail to use a QI, the proceeds of the transaction will be taxable. 3)All the proceeds from the relinquished property must be invested in the replacement property in order to enjoy the full benefit. Any money that remains after the sale is taxable. 4)Qualified professionals at every turn. In addition to the QI, you would be better prepared for your 1031 investment property if you seek the services of a CPA, commercial real estate specialist, and a real estate attorney. These professionals have the skills and knowledge you lack and can make all the difference in the world between success and failure.

While there are many ways you can invest in real estate, it would be a shame to miss out on the potential profit presented by 1031 properties and exchanges for investments.