The R&Z Group are experts in 1031 Exchange, guiding our clients to great success throughout this complex process.
Compass Commercial is one of the top brokerage in the United States for real estate investment sales, and a 1031 Exchange is involved in more than 60% of these sales.
What is a 1031 Exchange?
A 1031 Exchange is a process by which you can sell a qualified investment property and use the proceeds from the sale to purchase another qualified property while deferring capital gains tax. In effect, it works as a trade and not as a purchase, thus qualifying you to tax deferment benefits.
There are two important elements that define a 1031 Exchange:
- Timing – You need to accomplish the required steps within a strict timeframe, or pay capital gains taxes or hefty fines. Typically, you have 45 days from the close of a property’s sale to identify a replacement property, and 180 days from the close of the sale to acquire the replacement property.
- Like-Kind Property – A 1031 Exchange can only take place when the sold property and the property to be purchased are considered “like-kind”. The IRS defines “like-kind” to mean the sold and purchased properties are of “the same nature or character, even if they differ in grade or quality.” A 2017 update of the law states that like-kind assets are only limited to real estate properties, but you cannot exchange real estate for your personal use for an investment property.
Our 1031 Exchange Services
- We help you make an informed decision if a 1031 Exchange is the right investment option
1031 Exchanges have benefitted numerous investors in terms of maximizing their portfolio growth and the capital they can infuse in new investment. However, this avenue may not be the right one for your particular situation. You could, perhaps, profit more from taking the cash and paying capital gains taxes. We will evaluate your asset, determine its market value, and analyze your investment goals to guide you in determining if a 1031 Exchange is indeed your best option.
- We make sure your transaction meets the strict timeline required in an exchange
When you miss a given timeline, you could lose the tax-deferred status of the transaction and pay capital gains taxes for the sale of your property. We have one of the largest databases of 1031 Exchange buyers. Once you decide to conduct an exchange, we set out to find the right buyers for your property utilizing our extensive database and our own network.
- We help you select the type of 1031 Exchange to make
There are three types of exchanges: simultaneous, reverse, and deferred. Around 95% of all exchanges are deferred, as this gives investors more time to relinquish a property and acquire a replacement. However, your particular case may call for another type of exchange. We shall help you determine and accomplish the right type of exchange based on your specific circumstances.
- We help you identify the “like-kind” exchange that will maximize the value of your investment
As previously mentioned, “like-kind” properties encompass a broad spectrum. A common mistake is thinking the exchange is limited to the “same” property type, for example, an apartment building for another apartment building. Without a proper understanding of the spectrum of like-kind properties, you could lose out on great investment opportunities.
You can exchange a commercial building for a vacant land, or developed land for a strip mall. You can also exchange a single asset for two or more “similar” properties, such as an apartment building for three single tenant properties. Conversely, you can exchange two or more assets for a single one to consolidate your investment. The potential for “like-kind” exchanges is numerous.
We can help you identify replacement assets to enhance the value of your investments, provide the profitability you’re looking for, and allow you to achieve your long-term investment goals.
- We can assist you in performing multiple 1031 Exchanges
There’s no limit to the number of times you can engage in a 1031 Exchange. You can roll over the gains you make in an exchange into a new exchange many times over. You can also simultaneously perform more than one 1031 Exchange in separate transactions.
Multiple 1031 Exchanges can be highly nuanced because of the strict timelines and rules involved. We will help you avoid the pitfalls and guide you in making sound investment decisions at all times.
With our expertise and the excellent resources and clout of Compass Commercial, The R&Z Group can help you achieve the best result for a 1031 Exchange. Contact us here or call us at 408-772-8661 (Tony) and 408-912-2858 (Ray) to learn more.
1031 Exchange rules every real estate investor should know
If you plan to sell your commercial property, consider the 1031 exchange in order to defer or avoid paying capital gains tax. Widely used by investors in commercial real estate, the 1031 exchange is a section in IRS rules that allows you to use the proceeds of the sale of your property to purchase another piece of investment property of similar value. In effect, you will be “swapping” or doing a “like-kind exchange” of your property with another. For example, you can “swap” your commercial complex for an apartment building using the 1031 exchange if the new property equals or exceeds the value of the first. In this article, you will learn about the ins and outs of the 1031 exchange so that you can make the most out of your investment.
When selling an investment or business property, facilitating a successful 1031 exchange can help you defer taxes on the profits from the sale. In this post, we cover capital gains tax, which is a government fee imposed on every commercial real estate transaction.
We also discuss the 1031 exchange as a powerful financial tool for wealth generation and estate planning, and how you might use it to maximize profits from the sale of your business property.
By learning about various financial tools and options available to property investors in California, you will be able to sell your property with the best outcome in mind.
There is beauty in swapping investment properties compared to making an actual property purchase. Even with the complexities involved with such an exchange, the reward is a deferment of taxes usually connected with standard real estate transactions.
Note, though, that exchange deals of this nature require more than just one person making the transaction. Apart from getting good advice from an experienced real estate agent, you will also need the expertise of a qualified intermediary. This individual’s role is to facilitate the exchange according to the dictates of the Internal Revenue Service.
Your choice of intermediary will greatly impact not just the degree of smoothness of the transaction but also the security of your funds and legal documents while going through a 1031 exchange.