A 1031 Exchange is a real estate investment and asset management option, which enables you to
- Defer Capital Gains
- Use More of Your Equity to Create Wealth
- Increase Leverage
- Increase Depreciation Deduction
- Improve Cash Flow
- Allow for Relocation
When you put your money into commercial or residential investment real estate, a primary goal is to maximize the value of your investment. However, when it comes time for you to liquidate your holdings, capital gains taxes limit the ability to grow your equity and return on investment. If you could safely liquidate your investment and reinvest the proceeds into a new property or properties without the tax consequences you achieve the goal of maximizing value. The IRS identifies this reinvestment process as a 1031 Exchange.
What a 1031 Exchange does is create wealth
By deferring capital gains taxes on your relinquished property, you will have that much more to invest in your replacement property.
You can also diversify your replacement property by investing in other areas where there is a lower cost of living. For example, if your property is in Chicago and the property was one apartment building, you could possibly buy multiple properties in McHenry County or another area increasing your income, asset base and wealth while diversifying your financial risk.
Some things we can do for you on a 1031 exchange:
- We can handle both the sale of the relinquished property and the purchase of the replacement property.
- We will help you locate replacement property meeting your financial objectives and the requirements of the 1031 Exchange.
- We can help you and/or your employees find homes and financing, if you plan to relocate operations.
- We will provide access to a Qualified Intermediary to handle the Exchange, or you may choose your own.
- We will work with the Exchange conduit to insure full compliance with the requirements of the 1031 Exchange and work with your accountant and/or attorney to protect your interests.
- We can provide other services specially tailored to your specific needs.
The Exchange process is very specific and strict. For instance, there can be complications if you were to refinance with cash out before or after an Exchange. Under certain circumstances, this can create a taxable event. You also have a maximum of only 180 days to acquire the replacement property (or until the tax filing deadline, including extensions, for the year of the sale of the relinquished property). You also have only 45 days from the sale of the relinquished property to submit in writing the identification of possible replacement properties, unless of course you can acquire all replacement properties within that 45-day identification period. There are numerous additional steps in the process, not mentioned, that must be undertaken to make a successful Exchange, and this is why we work with professional 1031 Exchange companies.
Please click below for the Internal Revenue Code (subject to change) pertaining to 1031 Exchanges and, if you are interested in an Exchange, please complete the information request form below.
As this is highly complex and the above is subject to change, we do not act as a qualified intermediary, but as a conduit to help in the real estate transaction itself. Please enter into a 1031 Exchange with advice only from your legal and/or tax professionals for the latest in rules and guidance on how to best structure this process for your specific needs. If you wish, we can help you find a qualified intermediary.
Commercial and Investment Property Financing:
We can recommend several Lenders that could assist in financing your investment properties.
It is always wise, that a pre-qualification (or a pre-approval, if possible) take place prior to searching for property. This step will alert you to any potential financial problems that could occur from a credit situation or unconventional property. Doing this will assure that, if property is found that meets your investment objectives, the financing will not cause any delays or cause a deal to fall through from inadequate financial resources.