Let’s talk about a 1031 exchange.
Do you work with clients who are looking to buy or sell investment properties? If you don’t, would you like to? If the answer is yes to either of these questions, let’s talk about a 1031 exchange — a commonly used vehicle that many investors employ for tax advantages. Please know that Key Mortgage is not providing legal or tax strategy advice — simply providing some awareness and education around the topic.
A 1031 exchange (named after the IRS rule) is a real estate investing tool that allows for the “swapping out” of one investment property for another and deferring the capital gains, losses or taxes that you would otherwise pay at the time of the sale. Another commonly used term is “like-kind exchange.”
Here are few things to know about this tool:
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The 1031 exchange can never be used for primary or second-home properties. They can only be used to purchase property that is not currently rented but must be immediately turned into and maintained as an investment property.
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The sale of the current investment property and the purchase of the new one must adhere to the IRS guidelines. The lender will not provide any interpretation of what those are — that is left to a qualified tax and/or legal professional.
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There are timelines that have to be met in the sale and subsequent purchase of new investment property, but it does not need to be simultaneous to the sale.
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An investor can either sell one property and exchange it into multiple replacement properties or sell various properties to buy one property.
Want to know more? This is just a general overview of what a 1031 exchange is and how it can be used. Our loan officers can walk you through this, but your title attorney (if you don’t have one, we can introduce you to one) can help break it down even further. When we work together, you strengthen your team of professionals and look your best to your clients!
Connect with a Key Mortgage loan officers today!
