5 Common Mistakes to Avoid During a 1031 Exchange
A 1031 exchange gets its name from Section 1031 of the U.S. Internal Revenue Code, which allows you to avoid paying capital gains taxes when you sell an investment property and reinvest the proceeds from the sale within certain time limits in a property or properties of like kind and equal or greater value.
We want to share 5 common mistakes you should avoid when looking to sell an investment property and utilize the 1031 exchange program.
Common mistake #1
Failing to set up your 1031 exchange
You must reach out to a qualified intermediary to set up the 1031 exchange. When it comes to the exchange program they have some pretty strict deadlines. You do not want to miss any of them and want to get started as soon as possible. When you are first thinking about selling your investment property to buy another one, you need to start the process by reaching out to the 1031 expert first. This person do not have to be your real estate agent who helps you buy. We only have 2 in Northern Nevada and only one I truly trust!
Not using the full value of the exchange
When you are searching for your next home you might think that you no longer want the property to be the same value as your current property. You can always buy a cheaper home, but in order to utilize the entire exchange, you want to purchase the same or more expensive property.
Not meeting Timelines
As we mentioned in mistake number 1. One of the very first deadlines is 45 days including holidays, and weekends to identify your next property. These deadlines are EXTREMELY strict and you do not want to miss one!
Understanding the timelines
You can identify up to three properties within 45 days and if one of them falls out and you want to identify a new home your 45 would have started over. The most important one is you have to close on the property within 180 days of the sale of your sale.
QI or Qualified Intermediaries are not regulated by the United States Government so you want to make sure your funds are safe with them. The funds will transfer from your sale to the 1031 exchange company to the new property you purchase as a pass-through. We mentioned before there is not a lot of QI's and we trust only one! We will link her information below.
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IPX1031 - Investment Property Exchange Services, Inc.
5441 Kietzke Ln #100, Reno, NV 89511