1031 Exchange Chicago
The Benefits of Doing a 1031 Exchange in Chicago
Illinois is a geographically distinct state which includes vast agricultural regions, industrial cities, big cities, and natural resources such as lumber and coal. Illinois is famous for the Lincoln Presidential Library, Chicago skyline, Wrigley Field, and highly profitable real estate investment options.
Illinois has the headquarters of more than 30 Fortune 500 companies, including Boeing, Walgreens, State Farm Insurance, Caterpillar, Allstate, Allstate, Kraft Foods, and McDonald’s. Also, a wide array of industries power the state’s economy, including agriculture, livestock, finance, medicine, manufacturing, and biofuels.
Chicago – A Profitable Investment Destination
Real estate investment opportunities are abundant throughout the state; however, the best markets are Aurora, Chicago, Joliet, and Rockford. Chicago is a very popular real estate investment destination because of its diverse economy, which in turn makes this state an ideal place for workers to work and live.
Chicago is a metropolis that’s always under development, and there’s always something being constructed. Whether you look at the sky scraping condos downtown, the numerous single-family home projects under construction in Bronzeville, or the several rehab projects in Uptown and Lincoln Square, Chicago is a constantly growing and dynamic market.
Luckily, there are various protections in place to encourage developers – and aspiring real estate tycoons – to invest their energy, time, and money in Chicago real estate, without having to worry about the burdens of property taxes.
What Is A 1031 Exchange?
If you choose to do a 1031 Exchange in Chicago, you should understand the basics of 1031 exchange. 1031 Exchange allows an investor to sell a property hassle-free and reinvest the profits in a replacement property and to delay capital gain taxes.
To explain this fascinating piece of tax law, let’s begin with an example of why it’s so important to investors.
When an everyday consumer purchases a home – solely with the intention of living there – that property will definitely appreciate in value, and the homeowner may think of selling it in the future. Imagine if it goes up $200k in just a few years. Like anything else purchased or sold, your home is also taxable.
However, because of what’s known as the homestead exemption, here in Illinois (and in most states), this homeowner possibly wouldn’t have to pay taxes on their sale. In a nutshell, if the property is your home, then you have to move somewhere new once you sell; the homestead exemption allows a homeowner to roll any earned money forward to a new property.
How’s A 1031 Exchange Done?
You can time the sale of the two properties in such a way that you can defer taxes on the appreciation, thanks to 1031. Investors have a total of 180 consecutive days – starting on the day of the sale of the relinquished property – to the completion of a 1031 exchange.
However, there’s a catch. For example, within the first 45 days of that 180-day period, investors must identify up to three replacement properties of any value. Only these properties would qualify for the 1031 exchange, but you have the freedom to identify more than three properties, with some stipulations attached. 1031 exchange covers various types of investment properties, including land, commercial real estate, single-family homes, multi-family homes, and condominiums, and you don’t have to exchange the exact same type of property, one-to-one. The most important thing to understand is that the property must be held for investment or commercial use only; primary residences and secondary homes do not qualify.
After the identification of replacement properties by day 45, the investor then waits until day 180 to close on all of the proposed replacement properties. The investor must get a qualified intermediary – who may not be a real estate broker or financial advisor – to successfully complete the process of exchange.
With some calculative thinking, an investor or developer may never have to pay taxes on the capital gains of their investment properties – as long as he or she follows the 1031 exchange rules.
DST, TIC, and NNN properties are very profitable options too.
Final Word
Though a 1031 exchange offers great benefits to every investor, it entirely depends on the investor’s decision and how they make the most out of their exchange. Other things like property’s location, living condition, job availability, crime rate, etc. play a significant role in shaping up the future of any real estate investment. As a 1031 investor, you would certainly want your replacement property to be in a place that has a low crime rate and excellent opportunities for job-seekers. Chicago is one such place.
For further queries, do check our FAQ section to get answers to all your 1031 exchange related questions.
To know more about 1031 Exchange in Chicago real estate market, NNN, DST, and TIC you can speak to one of our advisors on 888-993-2835 or email us info@1031Xchange.com