In your efforts to secure a property for your BNB you may run into a situation where you are selling an investment property to obtain a replacement investment property.
For those of you who do not understand what a 1031 Exchange is, here is a brief summary.
You can defer capital gains on selling an investment property if you set up a 1031 carefully (adhering to all 1031 rules) pipe it to another investment property of equal value or greater.
It can be any kind of real estate to any kind of real estate, anything from undeveloped land, to commercial property, as long as both are qualified Investment properties.
Normally, you sell an investment property, use the proceeds from that sale to fund the purchase of your new replacement investment property.
WHAT IF, you need to purchase the replacement property (i.e. with cash) before you can sell the relinquished property to fund the new acquisition? You are totally screwed, right?
What I discovered, someone in their infinite wisdom created a 1031 instrument called a “REVERSE” 1031.
This way, the title to the replacement property is held in a special Exchange Accommodated Titleholder (EAT) until such time you can close the sale of your relinquished property thereby accomplishing the desired deferring of capital gains.
Please speak to a qualified 1031 Exchange Intermediary or Agent to get the full details as there are different costs involved and other requirements that I have not covered in this blog article.
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