Taking the Pain out of a 1031 Property Exchange

Written by admin on May 4th, 2011

Anything that has to do with the IRS has the potential to be a painful experience-even a 1031 property exchange. With this in mind you want to work hard to remove as much potential pain from the process as possible. There are many ways you can do this but first you might be wondering if it’s really worth the effort.

Why are 1031 Exchanges Worth Worrying With?

Because this is the type of real estate investing that allows you to start small and work your way up to bigger investments without paying capital gains taxes every time you turn around. Over the years this can mean big savings as most people don’t really “cash out” until retirement age when incomes (and tax brackets) are much smaller. The savings can be significant and most people find that it is well worth the effort, IRS and all.

Shop Around for Professional Facilitators for your Property Exchange

There are many professionals that should be involved in a 1031 property exchange. One that is an absolute requirement in order to maintain transparency and satisfy Uncle Sam is called a Qualified Intermediary (QI). This is a third party that is not only required but also very helpful in the property exchange process. You need to be absolutely certain that you find an excellent professional to handle this role. Compare, contrast, and get references before you decide on your personal QI.

Follow the Rules to Enjoy No Fear 1031 Property Investing

When in doubt double check the rules. It is much better to invest a little time up front to make sure everything is in place and where it should be than to find out too late that something was wrong. Double check all your paperwork and find a Realtor that really understands 1031 exchanges to represent you and help you find properties that will qualify.

No one wants to get on the bad side of the IRS. Even with the oversight of a qualified intermediary it’s a good idea to make sure you know what the rules are and that you find a Realtor that’s been around the block a time or two with 1031 properties.

Don’t just take someone’s word for it. Sit down and crunch the numbers for yourself. You should find that not only is this an investment option that can help you make more money then you would have thought possible but that surrounding yourself with qualified professionals can help you make even more money by the time all is said and done.

The real question you need to ask yourself is why you haven’t already made a 1031 property exchange. If you currently own a property but want to increase your “net worth” or investment portfolio there’s no reason not to begin your own 1031 exchange process.

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