Do you know that while doing a 1031 exchange transaction, you can acquire the replacement property first and then close on the sale of your old property? Well, it’s called a Reverse 1031 Exchange. A reverse exchange is also a kind of 1031 exchange. The only difference is that it’s opposite to a normal 1031 exchange. Reverse 1031 exchange rules require investors to acquire the replacement property before closing the sale of the relinquished property. Similarly, there are three other kinds of 1031 exchanges, which provide the benefits of tax deferment but are different from normal 1031 exchanges in one way or the other.
Delayed, Simultaneous, and Improved 1031 Exchanges also let you defer up to 100% capital gains tax.
Delayed Exchange – A delayed exchange is a typical 1031 exchange that allows investors to defer capital gains taxes on exchanging like-kind properties. The first step of a delayed exchange requires investors to sell the old (relinquished) property. The Qualified Intermediary holds the proceeds of the old property and reinvests it in the replacement property. Once you get the proceeds from your old property’s sale, you must identify potential replacement property within 45 days and acquire the same within 180 days.
Simultaneous Exchange – Simultaneous exchanges aren’t any more popular among real estate investors. The reason is obvious. In a simultaneous exchange, an investor is required to sell the relinquished property and acquire the replacement property at the same time. Since investors need to acquire the replacement property the day the previous property is sold, they barely get respite.
Improved or Built-to-suit Exchange – An improved exchange is a special kind of tax-deferred exchange that allows investors to repair the replacement property using the relinquished property proceeds. Another name for an improved exchange is ‘built-to-suit exchange.’ In an improved exchange, an investor can invest a portion of the proceeds on improving the replacement property. An improved exchange is possible when the replacement property’s price is less than that of the relinquished property.
Irrespective of how these 1031 exchange transactions operate, they provide the same benefits.
Oregon and Seattle 1031 Exchange markets are on a surge.
If you are planning to do a 1031 exchange in Oregon or Seattle, it’s the perfect time to kickstart your investment. 1031 exchange Oregon and 1031 exchange Seattle markets have shown an upward trend in the last few months. Investors have again started trading non-performing assets and old properties for premium high-valued real estate. You can find excellent buying options for your 1031 exchange in popular areas of Oregon like Salem, Portland, and others.
Invest in DSTs to close your 1031 exchange quickly.
While shopping for a replacement property, most investors struggle due to the lack of options. One of the best ways to complete a 1031 exchange is to invest the sale proceeds in a DST. DSTs are pre-packaged investment deals eligible for 1031 exchanges. With your investment in a DST, you get a fractional interest in one of the DST properties.
A DST investment saves you from the hassle of property identification.
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