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1031 Exchange Fear Tactics – Who do YOU trust?

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One of the most frequently asked 1031 Exchange questions we get is “How safe is my money?” The IRS has said that in order to provide “safe harbor” for your 1031 Exchange funds, they must be kept away from your immediate control and with a 3rd party.  Well, that’s kinda scary, now isn’t it? Especially when you don’t know this company. The reality is that these days, no matter where you store your money, whether it’s with your personal bank, in your mattress or your bury it in the yard, when you deal with large amounts of cash, there is always risk. And this is whether you are doing a 1031 Exchange or not!

If you are planning a 1031 Exchange, picking a QI with an established reputation for handling investor money is a necessity. You want your funds stored with as much security as possible and this includes a reputable bank, FDIC insurance and a solid 1031 Exchange Agreement between you and your QI. You also want good a Qualified Escrow Agreement between yourself, the QI and the QI’s bank. This added protection is optimal because with a Qualified Escrow Agreement, no one is able to move your funds without your signature.

Here is where you have to be careful. Several years ago a couple of individuals in the 1031 Exchange industry got the bright idea of spending client funds in high-risk, high-yield investments. And this was during a time when interest rates were much higher! Long story short, they lost some client money and they got caught. And, because of this greed, we all have had to suffer from a lack of trust with the general public. Might I also add that everyone who ever tried to steal a client’s 1031 Exchange money has been caught? Who cares. When it comes to your money, you want the best security possible, right?

Here is where the fear comes in. Several large 1031 Exchange companies are using this lack of trust to motivate investors with fear. Their message appears to be “Who do you trust?”. “We’re large, we would never think of stealing your money.” Or. “We’ve got a bunch of attorneys looking after it for you.” Hm. In light of the recent Wall Street banking scandals, these claims don’t seem to hold much water, do they?

Have no fear. Take control yourself. Regardless of the size of the 1031 Exchange Company you are considering, the best plan is to call the QI direct. Ask them to provide banking references as well as licensing, bonding and insurance information. And be sure to check those references out! Ask questions. Get informed. Most states have rules regarding how they allow QI’s to function. Find out what those rules are. The more you know, the more comfortable you will be with allowing a 3rd party to watch of your money until you are ready to spend it and complete your 1031 Exchange.

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Written by james

March 5th, 2013 at 3:29 pm

Posted in 1031 Exchange Info

Do you have to use a real estate agent to sell your property? Can we FSBO the house we own to maximize profits?

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Absolutely! You may certainly 1031 Exchange your property for another property without the assistance of real estate agent. 1031 Exchange is a tack-on to a straight real estate sale and all real estate rules still apply. Though, in defense of real estate pros, the advantages of using a real estate agent are endless. Often a full-time marketer is the best way to sell your property and help you find a new one. Most real estate agents earn their commissions which are deducted from your tax as a necessary cost.

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Written by admin

January 15th, 2012 at 10:37 am

Posted in 1031 Exchange Info

Can I exchange my third ownership (TIC) into a REIT?Thank you.

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This really depends on how the 1031 exchange property is deeded and is there actually going to be a sale of the property.

If you are a 1/3 owner is it “undivided interest”? Also, the property must be sold as the TIC. The TIC
can’t buy you out.
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Written by admin

October 23rd, 2011 at 10:36 am

Posted in 1031 Exchange Info

My rental house burnt down. Can I still 1031 Exchange it?

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1031 Exchange is not meant to assist with disaster relief. There are other types of exchanges available to you in the event of fire or compromised properties, what you are looking for is information about 1033 Exchanges. Here is a great article about 1033 Exchange.

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Written by admin

August 28th, 2011 at 12:54 pm

Posted in 1031 Exchange Info

My dad died during his 1031 Exchange. How do I continue it?

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If you are an heir to your father’s estate you and your other heirs may opt to pursue continuing your father’s 1031 Exchange. This is going to require the help of an attorney to help you with the Title Considerations of the exchange.

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Written by admin

August 28th, 2011 at 12:52 pm

Posted in 1031 Exchange Info

When is the 1031 Exchange tax due?

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If you successfully conducted your 1031 Exchange property, there should be no tax due from the exchange because your taxes have been deferred to the next sale…whenever you decide you want to sell it. You are required to report your 1031 Exchange with your taxes at tax time.

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Written by admin

August 28th, 2011 at 12:51 pm

Posted in 1031 Exchange Info

I own a residential rental property in VA that I am planning to sell. I am converting my current residence in Fairview Heights IL to a rental property and want to put the proceeds from the VA property into the IL property. What issues do I need to be aware of?

with one comment

Thanks for contacting Realty Exchangers.
Here are some issues that I see, though advice from an attorney or CPA is always preferred as I am only allowed to give general tips and information.
1. You should know that a 1031 Exchange can ONLY happen when there is an exchange between 2 or more separate parties. You CANNOT 1031 Exchange with yourself, even if the properties are titled differently. This means you are NOT allowed to move money from one property that you own into another property that you already own. This is a taxable event and there are no 1031 Exchange benefits available.
2. If you are converting your primary residence into a rental, you need to be able to show that you’ve collected rents for 2 tax periods before the IRS will allow you claim it as a rental.
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Written by admin

August 13th, 2011 at 10:37 am

Posted in 1031 Exchange Info

Good evening,Can predevelopment costs (i.e. architect fees / plans, permits, engineering, etc.) be packaged with land to be included towards the eligible costs of a 1031 Exchange?

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No they cannot. Only the costs to sell a property make be included in a 1031 exchange

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Written by admin

August 13th, 2011 at 10:37 am

Posted in 1031 Exchange Info

Can you tell me if there is a CO tax on a 1031 exchange done in the state and I am not a Colorado resident.

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We are not aware of any specific state tax on a 1031 Exchange, as 1031 is a federal action report with your income taxes.
1031 Exchange is no different than a regular sale.
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Written by admin

August 13th, 2011 at 10:36 am

Posted in 1031 Exchange Info

How do I become a preferred agent and get listed on your website?

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Easy. Check out http://www.realtyexchangers.com/1031_Exchange/index.html for more information.

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Written by admin

July 26th, 2011 at 11:47 am

Posted in 1031 Exchange Info