1031 Exchange - Maximize Your Wealth

Commonly called a 1031 Exchange for the IRS section it refers to, a tax-deferred exchange allows you to sell your Western North Carolina real estate investment property and buy new property with the profit from the sale and not pay taxes immediately. This strategy is an excellent way to diversify your investment portfolio and grow your wealth.

A Profitable Real Estate Strategy

Know this, the intent for the property must not be for resale but to hold the replacement property as an investment or for productive use in trade or business. The 1031 Exchange structures include simultaneous, delayed, build-to-suit, reverse and reverse build-to-suit. Because Highlands NC, Cashiers and Lake Toxaway real estate is an excellent investment, a great strategy for optimizing your 1031 Exchange is to purchase a rental home just below market value, rent it for a year, sell it then buy two rental properties with the gain. However, the property you are going to purchase must be “identified” and closed within a certain period of time. To “identify” a property, you must deliver a signed document to the person assisting you – who cannot be related to you – on or before 45 days from the date you sold the original rental property (including weekends and holidays).

A Few Rules of 1031 Exchange

You can identify more than one property as a replacement property so long as the total value doesn’t exceed 200% of the original property’s value. You must purchase replace property of the same or greater value as the relinquished property. There are several conditions related to reinvestment. First, it is also imperative that you reinvest all the exchange equity into the replacement property. Second, you must obtain the same or greater debt on the replacement property as the relinquished property. You don’t have to close on all the properties you identify; however, if at the end of the identification period you have identified more properties than allowed, it’s as if you identified no property at all. You will then owe taxes on the original sale. Once the 45 days have elapsed, you may not change your property identification list and must purchase one of the listed replacement properties or the exchange fails.

Professional Real Estate Guidance Is A Must!

As you can plainly see, using a 1031 Exchange to purchase Western North Carolina mountain property can be fairly complex and there are many more aspects to a **1031 Exchange you should know about. It is imperative you secure the assistance of an experienced Realtor who has conducted many of these types of transactions.  Contact us, NCMountainLife.com, your Western North Carolina Mountain 1031 Exchange Specialists for all the details to make your real estate investment strategies work smarter for
you. Our primary goal is to help grow your Western North Carolina real estate portfolio without fear of something going wrong at the last minute.

**Please note: All information provided in this article is subject to change by the Internal Revenue Service, so make sure you seek the advice of a qualified professional such as an accountant or attorney when planning your tax-deferred exchange strategy.