Three Questions You Should Ask Before Investing in a 1031 Property Exchange?

Written by admin on May 4th, 2011

In these troubling economic times, it’s often difficult to know where to turn for solid and dependable investment advice. Some terms, like 1031 property exchange may seem like a foreign language to you if you are new to the idea of real estate investing.

With the stock market doing crazy acrobatic stunts on a daily basis and big names in the business taking investors for a wild ride down the rabbit hole, it’s difficult to know where to turn to protect your family’s future.

If the term 1031 property exchange is one that gets your attention, you should ask yourself these three questions before you decide to dive right in and go for it.

#1 Will this type of investment help me meet my investing (savings, retirement, etc.) goals?
Chances are good that the odds of meeting your goals can be greatly improved by making use of a property exchange and the tax benefits this provision allows.

There are a few instances when your immediate or some long term goals can interfere with this type of investment and it’s better to find out earlier rather than once it’s too late if this is the case.

Do I have the capital to invest in this type of venture?
Investments almost always boil down to money.

One good thing about 1031 exchange is that you can start small and work your way to larger properties over time.

This is a long-term investment strategy, not a get rich quick type of investment.

The idea is that you find a property that you can afford the down payment on and get financing for as your first investment, build up equity, and then leverage that equity into an exchange for a similar property that has greater value all the while deferring capital gains taxes until you are prepared to “cash out.”

The more money you have up front for the initial investment the more options you will have on that first property for your investment.

How long am I willing to hold onto the investment property?
A 1031 property exchange is a long-term investment. It’s not a property flip or something you buy and then turn around and quickly sale for a profit.

This is about trading up and investing for the long haul. There are very strict guidelines as to what does and does not qualify for a 1031 exchange. Be aware of what those regulations are before you decide this path.

This investment is designed to grow over time as you exchange one property for another and another. The sky is the limit with this type of investment. It is up to you to decide if this will be a good choice for you.

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Leave a Reply