Posted on

Tips On 1031 Exchange Financing

Let us face it, none of us prefer to pay taxes, however we've got to, it is inevitable. The only great thing is that the government makes it possible for us to utilize our cash to make even longer until they request their cut. If you invest in property, ideally you buy low and sell high-quality. Today you might be facing huge capital gains taxes on the profits. 

That is where the 1031 exchange financing comes in. Section 1031 of the IRS Code lets you defer taxes on cash obtained by the sale of a single investment property using those profits to buy another property. One stipulation is that you need to pick a replacement property that's of equivalent or higher value to the initial. You can know more about 1031 exchange financing via

Image Source: Google

 If you sell your investment property, the cash is held in escrow by a Qualified Intermediary (QI), who's a third party with knowledge of bookkeeping, finance, or property. The QI retains your cash till you've chosen another property to buy.  However, you need to rush to choose your next house. 

So, as to perform a 1031 exchange, you need to identify a minumum of one replacement home within 45 days of selling the first house, and you need to buy the replacement in 180 days of the sale. It's highly advisable to get everything figured out before you sell your house, in which you would like to purchase next, that your Qualified Intermediary will be, the way to register for a 1031 exchange, etc.

This will help save you time, particularly when you're rushing to locate replacement properties. Additionally, you might not have a complete 180 days to obtain your next house.