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Experience with 1031 Exchange?
Old 02-02-2005, 09:40 AM   #1
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Experience with 1031 Exchange?

Anyone with experience with a 1031 Exchange? It permits the exchange of one property for another investment property without paying capital gains taxes. I'm interested in exchanging raw land for a second home (for investment purposes, as per the statute).
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Re: Experience with 1031 Exchange?
Old 02-02-2005, 09:53 AM   #2
 
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Re: Experience with 1031 Exchange?

I am not that familar with the ins and outs of 1031 exchanges. With all of my real estate experience, I have
only done one exchange. However, there is a very active
group of exchangers out there. I worked on doing an
exchange for about a year but found it too difficult
(too much work) to find a match that worked for all
parties. I even looked at some "three-way exchanges".
I do not recall the one site which was the best, but if you
search under real estate exchange you will find it. They
listed some profiles of members and how many exchanges they had done through the website. It's quite interesting.

JG
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Re: Experience with 1031 Exchange?
Old 02-02-2005, 10:02 AM   #3
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Re: Experience with 1031 Exchange?

Be sure to work with someone who knows what they are doing. You absolutely have to cross the tees and dot the eyes.

Generally, real estate held for business/investment purposes can be exchanged for any other real estate held for business/investment purposes.
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Re: Experience with 1031 Exchange?
Old 02-02-2005, 10:24 AM   #4
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Re: Experience with 1031 Exchange?

My readings on the subject indicate that it is acceptable to sell raw land and procure an investment home (second home) in lieu of the first piece of property. As you indicated, care must be taken to follow the rather restrictive rules (time to do the deal is strictly enforced, for example) and to use a "Qualified intermediary" to hold on to the proceeds of the sale until a transfer of the money is made for the new property. That property than must be used (or held) as an investment for a period of time before it may be used for other purposes (there is no "bright line" when such a time frame is acceptable to the IRS, so care must be taken here).
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Re: Experience with 1031 Exchange?
Old 02-02-2005, 02:39 PM   #5
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Re: Experience with 1031 Exchange?

All good advice, but you HAVE to use an escrow agent anyway, so why go crazy trying to figure it our yourself. Find a reputable company that does 1031 exchanges and let them fill you in on what you can or can't do with your real estate.
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Re: Experience with 1031 Exchange?
Old 02-02-2005, 04:42 PM   #6
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Re: Experience with 1031 Exchange?

Try IPX1031.com
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Re: Experience with 1031 Exchange?
Old 02-02-2005, 05:47 PM   #7
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Re: Experience with 1031 Exchange?

Rich, you are basically right in your reading, but be careful with the term "second home", that would not be a qualified property, but, as I believe you are eluding to, you could purchase a piece of investment real estate that you might could convert to a second home in the future. And, again you are right that there is no cast in stone timeline for you to be allowed to convert the property, it is based on "facts and circumstances".
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Re: Experience with 1031 Exchange?
Old 02-03-2005, 08:10 AM   #8
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Re: Experience with 1031 Exchange?

Quote:
Try IPX1031.com
Good site. Thanks.
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Re: Experience with 1031 Exchange?
Old 02-03-2005, 09:21 AM   #9
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Re: Experience with 1031 Exchange?

I have done 1031 exchanges twice. Once with a national company, and once with a local "qualified intermediary", and working with the local person was much easier. Get a reference from other local realators you trust, or anyone dealing with comercial property you trust. Fees should end up at $1k or less.

WARNING: you need the 1031 person (qualified intermediary) involved before you sell the first property. It is best to involve them before the contract is signed, but not essential. There are contract clauses that are beneficial - that require them to cooperate with the exchange. You actually sell the property to the QI, who sells it to the buyer, and this is an important step. The contract should include assignability clauses to allow this.

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