The Keys for a Successful 1031 Exchange

One of the most important benefits that you can get when you are investing in a real estate property is the 1031 tax deferred exchange. This 1031 tax deferred exchange is the tax code which allows you to not only put up for sale a real estate property today but also defers the capital gains taxes into the future. Thus, through a 1031 you are spared with enough money which in turn you can use in order to buy a property that has a much larger cash flow.

There are mainly three key rules that you must follow in order to have successful 1031 exchanges. The first of which is that you must trade debt with debt and at the same time equity with equity. In other words, the total value of your replacement property must either be equal or greater than the value of the property that you are selling. This also means that the equity that you received from the sale must only be used to purchase the replacement property.

The second rule is that the funds from the sale of your property must directly pass your Qualified Intermediary. This is a rule that you must strictly follow since the failure to do so will void your 1031 exchanges. The third and final rule is timing. This means that you must comply with the time requirement that the IRS has specified. Since like in the second rule, the failure to do so would mean the forfeiture of your exchange.

There is your 1031 exchange explained. Speak with a professional that can guide you through the process and make sure that you are meeting all of the requirements to save on your real estate investment taxes.