Making The Most Of A 1031 Investment
Among the many varieties of 1031 investment open to the real estate investor, Tenant in Common Exchange transactions using the Section 1031 guidelines for property exchanges offer some interesting possibilities, among which is the possible ownership of a small part in a business once reserved for more cash-backed investors. These transactions are achieved in the same manner as all Section 1031 exchanges and have the same basic requirements. Once the investor has decided to exchange or flip his property he must engage a qualified intermediary to handle all of the aspects of the 1031 investment. The qualified intermediary will receive the funds from the sale of the original property, which will be kept in a separate account until the exchange property has been located and purchased. He will then disburse this payment. He will also oversee all of the paperwork and make sure all is in order so the exchange will take place as smoothly as possible. The investor has the responsibility of notifying the qualified intermediary of his choice of replacement properties within 45 days of the sale of the original property. The entire 1031 investment transaction must be finalized within 180 days in order to satisfy the strict time requirements imposed by the Section 1031 regulations. Both properties must fall under the classification of like-kind in order to be considered a 1031 investment and to be allowed to enjoy capital gains taxes deferment offered by the Internal Revenue Code. As in any Section 1031 investment or transaction, an investor in a Tenant in Common exchange is not limited to the amount of times he may use this option, as long as he successfully follows every stipulation each time. Section 1031 allows for one property to be exchange for as many other properties as it would take to meet or exceed the sale price of the original property.
A Tenant in common Exchange venture affords the investor with the opportunity to enter into joint tenancy with a group of investors. For an investor with a smaller sum to put toward a 1031 investment, this allows him the chance in some instances to own a part, albeit a tiny part, of a larger more lucrative commercial enterprise, such as a hospital, a large condominium complex, a shopping mall, a United States Government corporation, a grocery store chain or other such investments that normally would have been beyond his reach. Section 1031 allows the investor all of the same rights as the other investors regardless of the size of his share of the property and the holding of his own deed. Because of the use of a Section 1031 investment or exchange, a small investor can gradually build himself up to ownership in an enterprise formerly reserved for others able to afford a larger cash output. It is now possible to join such a group with an investment as low as $100,000. By carefully flipping or exchanging properties, an investor may have the opportunity to grow a nice nest egg for the future while enjoying the benefits of capital tax gains using Section 1031 of the Internal Revenue Code as an aid to accomplishing this endeavor. Membership in a Tenancy in Common 1031 investment also brings the benefit of income growth potential, and eliminates the responsibility of property management, such as rent collecting and upkeep.
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