A 1031 exchange is an investment strategy that lets investors defer taxes on capital gains post the sale of an investment property. Generally, on selling a property, the investor is required to pay taxes on the gains. However, a 1031 exchange doesn’t require investors to pay taxes on the transaction. Instead, they can reinvest the entire proceeds into a bigger and better property. The process is quite simple. List your current investment property for sale and reinvest the entire proceeds in a new like-kind property under a 1031 property exchange agreement. That’s it. You saved your capital gains taxes.
Like-Kind Is A Term Used To Describe Properties Of Similar Nature.
To be able to defer capital gains taxes using a 1031 exchange, an investor must reinvest the proceeds in like-kind property or properties. For example, if the property you sold was a rental property, then your new property must also be a rental one. In 1031 exchanges, the property you sell is termed as the ‘relinquished property,’ and the property you acquire is called as the ‘replacement property.’
DST 1031 Investments Are Popular Because Of Two Reasons
Generally, the IRS gives an investor 45 days’ time to identify one or more replacement properties. If the investor fails to identify the replacement property before the deadline, their 1031 exchange will lose validity. This is the most challenging task when doing a 1031 exchange. To avoid the hard work required in property identification, 1031 exchange investors invest in DSTs. A DST or Delaware Statutory Trust is a private governing body that owns, manages, and sells investment properties. A 1031 exchange investor can reinvest their sale proceeds in a DST and complete their 1031 exchange. DST 1031 investments are popular because of two reasons –
- It eliminates the pressure of property identification.
- Ensures a regular flow of income to investors.
Locate DST 1031 Exchange Properties with Ease.
You can wander on the internet and may find a few DST 1031 exchange properties listings. However, one of the best ways to find DST 1031 exchange properties is by speaking to a local real estate broker or a 1031 exchange expert. We have a team of experienced 1031 exchange experts, especially to help you in your 1031 exchange.