• Jul 05 2023 2:22 PM

1031 Exchange- Your Real Estate Investment Tool

Hearing the name 1031 Exchange may seem daunting, but it's a simple and straightforward real estate investing tool that can help save you money on your next investment property purchase. 

What Is A 1031 Exchange?

A 1031 Exchange is an IRS tax code that allows an investor to sell a previously owned investment property, take that money, and put it into a new property, sequentially postponing having to pay capital gains tax. 

How Does It Work?

Find A Like-Kind Property
A property is considered like-kind if it is the same in nature as defined by the IRS. A single-family home would, in most cases, be like-kind to another single-family home, as would a condo to another condo. With the exception that real property in the U.S. is not like-kind to real property outside the U.S.

Select A Qualified Intermediary 
A qualified intermediary is a third-party person, company, or entity that sells your investment property on your behalf, buys your like-kind property, and then transfers the deed to you. The qualified intermediary holds the funds from the exchange in escrow until the new purchase is complete. 

Known Your Timeline
After selling an investment property, you must identify a potential replacement property within 45 days. You will then have up to 180 days from the sale date of the initial investment property or until your tax filing due date, whichever comes first, to complete the transaction of acquiring your replacement investment property. 

Inform The IRS On Your Transaction
Once you purchase your new investment property, you must complete the IRS Form 8824 with your tax return. On this form, you will provide the old and new property details, the parties involved, the exchange timeline, and the money involved. 

KBRG'S proven track record with investors enables us to provide our expertise so you can confidently make a decision. Let's connect; we'd love to help teach you how to build wealth through investment properties.