If you are investor, you definitely want to get familiar with 1031 Tax Exchanges. A 1031 Exchange is when you sell an investment property and use the proceeds, equity etc. to buy a, “like kind” property. This entire transaction goes through
a 1031 Exchange Intermediary. The Intermediary holds all the money, and funds your purchase transaction(s). 1031 Exchange is a great way to Defer your taxes until a further period in time.
In a 1031 Exchange scenario, a buyer could sell their property, and purchase several properties with the proceeds. Upon selling, an Intermediary would hold the proceed funds, the buyer would have 45 days to identify property/properties, then have 145 days to close on said property. All of the funds would go through the 1031 Intermediary.
Another alternative to buying a property yourself, is doing a 1031 Exchange into a Tenants in Common (T.I.C). This is when you invest a sum of money into a large property with many different partners or entities involved. Your smaller amount of money would give you limited ownership of a large property/properties. Generally in these scenarios, the percentage return on your money is guaranteed, and you can sell your portion of ownership at anytime. This is a great alternative for investors that may not have found a replacement property for their 1031 Exchange. By Exchanging into a T.I.C, you could perform a 1031 for the sake of deferring your tax payments until you find that perfect replacement property. T.I.C’s usually have a minimum sum required to gain ownership. T.I.C investment properties are perfect for investors who want a “hands off” investment with a pre-determined rate of return.
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