Value Bomb: 1031 Exchanges
Check below for the transcript of our 1031 Exchanges guidance video:
1031 exchange is tax-deferred exchange, meaning you don’t have to pay the typical capital gains tax that you normally would upon selling a property
There are some criteria that need to be met, but here are the top three considerations:
First it has to be an investment property, so it can’t be your primary residence or a home you use for your own personal use. The second is the exchange process has to transpire within 180 days of each other, so once you sell your original investment you have to close on your replacement property within 180 days. You can also do a reverse exchange, which is where you buy the replacement property first, but then you still have to sell that original investment within 180 days. The third thing to consider is it has to be a like-for-like exchange. It has to be real estate to real estate; it can’t be real estate to an art investment for example.
1031 exchanges actually aren’t difficult. They seem more complicated than they are, but you just want to make sure you have a good team in place from your agent, to your escrow officer, to your exchange accommodator, and your accountant.