How do I do a 1031 Exchange?

Explained by Sabrina Glover

A 1031 exchange is a tax provision that allows you to defer paying capital gains taxes on the sale of an investment property if you reinvest the proceeds in another investment property of equal or greater value. This can be a valuable tool for real estate investors who want to grow their portfolio without having to pay a large tax bill.

This is a useful tool purposefully designed to encourage investors to grow their portfolio by purchasing real estate of greater value. It can be used by investors to improve their investment strategy allowing them to sell a property that is not performing well and reinvest the proceeds into a property that is more likely to appreciate in value.

It can be tricky so it is important to make sure you are getting the proper guidance.

The first step is to get connected with a qualified intermediary, which we can help you with. An intermediary is a third-party company that will hold the proceeds from the sale of your property in escrow until you purchase the replacement property.

Next, you will need to find and “Identify” the replacement property. The replacement property must be of equal or greater value than the property you are selling, and it must be of a like-kind. This means that the two properties must be used for the same purpose, such as investment or rental property.

Upon selling your property, you must identify up to 3 properties withing 45 days and close on one of them within 180 days. If you do not meet these deadlines you may lose your ability to defer the capital gains.

If you would like to talk about seeing if a 1031 exchange is the right move for you or if you would like The Glover Team to guide you through the process, reach out today! We will connect you with our preferred qualified intermediary, experienced accountant, and attorney to guide you walk you through the transactions in order to ensure a successful exchange.

Sabrina Glover - The Glover Team - Platinum Partners Realtors - Downers Grove