1. Appoint a QI before selling your property
Every step of a 1031 Exchange transaction, whether it's selling the relinquished property or the identification and purchase of the replacement property, needs to be performed with the help of a Qualified Intermediary (“QI”). A QI is essential for a profitable 1031 Exchange transaction. QI helps you to smoothly complete the otherwise complicated 1031 real estate exchange process, ensuring that all the IRS guidelines are correctly followed. A QI needs to be an independent entity bound by a written agreement with the investor to perform the exchange transaction.
2. Begin early
After completing more than 150K+ successful 1031 Exchange transactions, the first advice we give to our clients is - "Start searching for replacement properties before you close. The 45-day identification period gets over instantly."
3. 1031 Exchange Time Period Guidelines
IRS has issued precise identification period guidelines for a successful 1031 exchange transaction. Replacement properties must be identified within 45 calendar days following the closure of the relinquished property. 1031 exchange investors need to comply with one of the three property identification rules when considering potential replacement properties. These rules include the 95% Identification Exception, the 200% of Fair Market Value Identification Rule, and the Three Property Identification Rule.
4. Tax deferral maximizes your wealth
Deferring capital gains tax payments using a 1031 exchange allows investors to leverage the income gained on the sale of a relinquished property and earn higher returns by reinvesting in a replacement property. The possible value of reinvestment profits could increase incrementally every time an investor delays paying capital gains taxes and exchanges real estate property following 1031 Exchange guidelines.
5. Use a Delaware Statutory Trust as backup
Delaware Statutory Trusts are prepackaged and readily available. DSTs provide the investor with the potential for annual appreciation and depreciation (tax shelter), and most have minimum investments as low as $100,000, allowing some investors the benefit of diversification into several properties. It is recommended that you identify the trust’s real estate as one of the three replacement properties by the end of the 45-day identification period for a 1031 Exchange. DST's can serve as a backup if the preferred exchanges are unable to be completed for any reason during the statutory period.
Choose us for a profitable 1031 Exchange
1031 Exchange process is complicated, and it is recommended to seek help from expert professionals. We are always at you service for any assistance and consultation regarding 1031 exchangeAdd paragraph text here.
