The Best Advice on Resources I’ve found

A Quick Intro to 1031 Exchange

The starter exchange is also known as 1031 exchange. The 1031 exchange permit investors to defer paying capital gains taxes on the property. The 1031 exchange helps an investor to acquire property without incurring a tax liability.

So if you want to acquire a low-income property that requires high maintenance you could do this without incurring tax burden through the use of 1031 exchange. The use of 1031 exchange could even help an investor move hiher investments from one place to another without the burden of tax.

1031 exchange allows swapping of one property with another of the same kind. To buy time due to the challenge of finding properties of the same kind the 1031 exchange allows for delays.

In the event you want to sell an investment property you are required to pay capital gains tax. You could even incur a lot when selling an investment property due to tax burdens. BY using the 1031 exchange you make a kill when selling a rental property that has more value than the time you acquired it.

You could only swap a property of the same kind and value when using the 1031 exchange. You can avoid the tax burden by using 1031 exchange for quite a period.

You only buy time to pay tax when you use 1031 exchange. It actually helps an investor buy time before they pay for tax. It helps the investor avoid sudden tax obligation. The 1031 exchange is mainly used by the real estate investors.

Both the purchase price and the loan amount are required to be the same or a bit higher than the replacement property according to the terms and conditions of the 1031 exchange.

There are four categories of the 1031 exchange which includes the simultaneous exchange, delayed exchange, reverse exchange and the construction or improvement exchange.

The simultaneous exchange allows for a direct swap of properties; the exchange happens in one day. Due to the difficulty in finding a person with the same kind of property the simultaneous exchange is not that common. It could happen but its possibility is very narrow.

Delayed exchange is the most common type of 1031 exchange. Before replacement property could be found an investor could sell their property.

The reverse exchange requires that an investor pays all the money which may be hard to come by since the banks do not lend the money for this particular type of exchange.

When the property an investor is supposed to acquire is of less value than the one they want to relinquish the construction or improved exchange is used to build or enhance the property to be bought or exchanged for.