1031 Delayed Exchange
Delayed Exchange is an exchange of property to put off capital gain taxes, in which the funds are placed in a binding trust for up to 180 days while the seller acquires an "exchanged" property, pursuant to IRS Code sec. 1031. It is sometimes called a "Starker" after the man who first used this method and survived an IRS lawsuit.

It represents a simple, strategic method for selling one qualified property and the subsequent acquisition of another property within a specific time frame for the deferral of capital gain taxes. Indeed, any property owner should consider a Delayed Exchange for the sale of their existing property. To do otherwise would necessitate the payment of capital gain taxes in amounts that can exceed 20% to 30%, depending on the appropriate combined federal and state tax rates.

It also provides exchangers with more flexibility and options in acquiring the replacement property than the simultaneous exchange. The delayed exchange begins when the exchanger's first relinquished property is sold and is completed when the last replacement property is acquired within the prescribed exchange period. There are two basic aspects to a Delayed Exchange. First, the purchase price of the Replacement Property must be equal to or greater than the sales price of the Relinquished Property. Secondly, all equity received from the sale of the Relinquished Property must be used to acquire the Replacement Property.

Several Steps in a 1031 Delayed Exchange

STEP 1
List your exchange property for sale with a licensed real estate broker.

STEP 2
Begin your search for replacement property.

STEP 3
Open escrow on the exchange property being sold and complete the exchanged information sheet which was given to you.

STEP 4
Provide written notification of the properties you wish to identify, not later than 45 days following close of escrow on the first property sold.

STEP 5
Notify immediately as soon as you open escrow on your replacement property.
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1031 Exchange - Investment Properties: 1031 Exchanges
If you are selling an investment property and planning on re-investing then the 1031 exchange is right up your alley. A 1031 exchange is basically a tax shelter allowed by the IRS where you sell an investment property and then re-invest the profit from that sale into another property. Now, keep in mind that you [...]

1031 Exchange Property market report cont.
Of the 9,400 currently available net leased properties, 17.3% were placed on the market within the last 30 days, 27.6% in the last 1-3 months, 28.5% in the last 3-6 months and 26.6% have been on the market for over 6 months. These percentages continue to illustrate a constant gain in the number of properties available since Q3 2004

If you are considering a 1031 exchange please visit http://www.1031-nnn-properties.com/ for more in depth information on 1031 exchanges or to speak with an investment specialist about acquiring triple-net properties.

Achieving Wealth with Real Estate Investment

With investing in Real Estate, there are many ways to make a living. One way is owning a rental business, a great foundational platform to launch other ancillary services and profit center. The existing housing business (rentals) makes an excellent platform from which to launch a parallel business opportunity.

When you invest in real estate, you can choose whether to buy and rent a property or you may choose to flip it, buy and sell for instance. The safest way to invest is to buy wholesale properties that are in the sweet spot of the rental market. The goal is to find an investment property with a good and great positive cash flow. This is the best way to achieve wealth.

Positive cash flow is a situation in which the energy cost savings from an energy-efficiency improvement exceeds the payment for the improvement in a given time period. Expenses that you deduct from the rent payments you've collected may include items such as operating costs, taxes, and the mortgage payment.

The positive cash flow gets from a property will depend upon three different things:

  • The amount of the rent being charged.
  • The amount of the mortgage payment.
  • The cost of operating the building.

Analyzing these three things is very crucial to achieve wealth in Real Estate Investment. Using borrowed money to finance your real estate investment is how many investors make a profit. They simply make money off borrowed money. One way to get good cash flow is to make a small down payment on the property, making certain you acquire a mortgage that is lengthy and low-interest. Basically, a lower mortgage payment means you will be getting a higher cash flow.

Another way of keeping a positive cash flow is to take out an interest-only loan. This type of loan usually is a short-term loan, usually about a five-to-ten year length of time, in which you are paying the interest only. After the period of the loan is up, you will need to either sell the property or refinance. This, however, does give you a low payment and will help you to get a higher positive cash flow from your investment property.

The most important thing to remember is that if you want to achieve wealth by investing in real estate, you must maintain a positive cash flow on your properties. By making your mortgage payment is as low as it could be, keeping the operating expenses at a minimum, and pricing the rent amounts correctly, you will find that you will not only create a positive cash flow, you will be able to achieve the wealth you want for yourself.
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What is a 1031 exchange?

A 1031 exchange (also called a Starker, like-kind, or tax-free exchange) occurs when an investor sells property and then uses the sale proceeds to purchase a similar piece of property–in essence, "exchanging" one property for another. If you adhere to IRS regulations regarding this transaction, you can defer all of the tax on the sale of the property.

Normally, the IRS requires that you pay taxes on your gain from the sale of property, but regarding a 1031 exchange, the IRS declares that no funds are actually generated by the sale. Thus, there is only a "paper gain," which the IRS will not tax, and until you can defer the tax indefinitely until you sell the property for cash.

1031 exchanges are potentially very lucrative, but the IRS does restrict their operation. You have to follow a strict timetable and allow a neutral part to hold the sale proceeds in the time between the sale of the first property and the purchase of the replacement property. In addition, you can only exchange investment and income-producing property of like kind. Even with these restrictions, however, thousands of businesses and individuals have benefited from 1031 exchanges.