Additional Important Points:
These are some FAQs and other important points to ponder considering a 1031 exchange.
- Properties can be in different states
- Any of the 50 - not outside of U.S.
- Time limitations CAN NOT be extended. (45 and 180)
- A partial 1031 is allowed.
- Trading down, desire to use some proceeds for personal use
- You CAN refinance the new property after the exchange!! No waiting period.
- You can have a mortgage on the replacement property
- 1031 Exchanges are not always difficult - but they have guidelines that are VERY important. •Any investor can benefit from a 1031 - not just a "big" investor
- The cost of a 1031 could be approximately $600-800 for a simple transaction, and several thousand for a custom or more complex scenario. Certainly worth the cost.
- You can not "flip" a property and use 1031 - you have to hold the investment property for at least one year.
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It is important to note that Steve Kappre is not a tax accountant or an attorney and only offers this information in regards to his personal experience. Consult your personal 1031 exchange consultant for your personal needs and scenario.
Treasury Mortgage - 550 Bridgeton Pike, Mantua, NJ 08051 - 1810 Springdale Road, Cherry Hill, NJ 08003
Licensed by the NJ Department of Banking and Insurance
Good information Steve. I think this next year we could see a lot of these transactions.
Hi there,
If I buy a house at
$25k, fix it up and resell at $85k - I need to buy another house for $85k or
more, now - right? Won't exactly work if that is the case. I need to buy
again at $25k to fix up and resell at $85k. Get what I am saying?
To be more clear -
What amount are you required to re-invest in your next 1031 purchase when
you sell? The entire amount of the sale? Or just the profit portion? And
how was that calculated?
As a live example:
$50,000 purchase price
$22,000 repair cost
$ 4,700 monthly carrying costs
$21,050 closing costs (for self & buyer incentives)
$135,000 sales price
$37,250 net profit
Do you now have to buy something with the $135,000 sales price? Or the
$37,250 net profit? Since you are doing this to avoid paying capital
gains...it would stand to reason that it is the profit that you need to
re-invest.
Scott
Scott - you can buy a property or properties to reinvest in. You can sell one property for instance, realize a gain of $75,000, and buy 3 $25,000 properties with that $$. You can also sell several and buy one. The important thing to note is the proceeds all have to be used, or the amount not used is taxable.
Let me know if you need more help. I'd be happy.