1031 exchange tax deferred benefits are hard to ignore

Section 1031 of the Internal Revenue Code contains arguably one of the most powerful provisions of the tax code for real estate investors the 1031 tax exchange. Many highly successful real estate investors have used this tax code provision in combination with aggressive pyramiding and upgrading strategies to amass huge investment property portfolios. Heres how it works:

OVERVIEW
A Section 1031 Exchange allows you to exchange like-kind investment properties without triggering the payment of capital gains tax. As your property assets appreciate in value you have the ability to upgrade into larger properties with greater cash flow. Section 1031 also gives you the flexibility to exchange your rental properties that have appreciated in value in hot markets, and re-invest into lesser-known areas that are expected to develop and become the next hot market in years to come. You can continuously defer these capital gains taxes as you continue to pyramid your property investment portfolio into larger and larger properties.

1031 EXCHANGE BENEFITS
There are a lot of benefits to considering the use of a 1031 exchange:

TAX DEFERRED INVESTING
The ability to re-invest your entire property equity without tax erosion can significantly enhance the amount of capital that stays invested and can make it easier to upgrade into higher value properties with greater cash flow.

INCREASE CASH FLOW
This decision to upgrade into higher quality properties with greater cash flow can occur faster now that taxes are a lower priority transaction decision. In some markets the real estate values can get ahead of the available cash flow available from the property. In these situations it may make sense to lock in your gain and look to re-invest in another property where you can achieve higher cash flow returns.

TIMING THE MARKET
The ability to speculate on the next hot market area or region is a much easier decision under a 1031 exchange. Why not lock in your profits on property that has already risen dramatically in value and re-invest it in the next hot market? As long as your capital gains are deferred making these transaction decisions is easier.

COMPOUND RETURNS
If you are stepping up your portfolio through a series of exchanges over time your full capital gain can be re-invested without tax consequence, resulting in accelerated equity accumulation.

FLEXIBILITY
The ability to switch into like-kind properties as defined in the tax code gives you a range of investment options and flexibility. If you dont want a lot of the headaches associated with managing property you can also consider Tenant in Common exchanges, which do qualify under Section 1031 of the tax code.

CONCLUSION
1031 tax exchanges gives real estate investors a lot more options and flexibility to make better investment decisions on their real estate holdings without the issue of tax over-riding sound judgment. If you own a rental property or are considering it you owe it to yourself to see if a 1031 exchange is right for your circumstances.

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1031 Exchange Companies

The easiest method to begin a 1031 Exchange transaction is to contact a good Exchange Company. The information concerning the exchanger, time and place of the closings, and a copy of the contract to sell the relinquished property are the preliminary papers to start the process.

From this information, the company makes exchange documents and forwards them to the attorney or customer. The lowest fee charged on a standard deferred exchange is $600.

A 1031 Exchange, like any real estate transaction, involves balancing competing pressures in speed and quality. Therefore, companies in this line recognize pressures and design their service to satisfy both.

Good companies manage all aspects of the exchange. They provide service that is quick, easy to use and backed by experience. In good companies, experienced attorneys are the managers. The senior staff will be rich in experience with regard to investment property transactions. The specialized team of attorneys mainly deals with more complex reverse and build-to-suit exchanges.

The main parameters that distinguish a good and bad exchange company are speed, service and the security they offer the client. Speed lies in the pace at which the company prepares the document. The documents are then sent to the closing table, allowing the seller to close and proceed with the exchange. Service is the dexterity in preparing all documents required for the exchange, including reminders of 45 and 180-day time limits and extensive complimentary consultations.

Security comes in the form of an unconditional guarantee on exchange funds from Insurance Companies: high value fidelity bond coverage and Professional Liability insurance cover.

These days, banks are working with Exchange Service providers. The Cole Taylor Bank of Chicago is one of the largest independent banks in Chicago, and joined hands with Nationwide Exchange Services (NES) of Cupertino in California in a strategic alliance for handling Cole Taylor’s tax-deferred 1031 Exchange business. This Chicago bank specializes in serving the business banking, real estate lending and wealth management of closely-held and family owned small and mid-sized businesses. Cole Taylor Bank is an Equal Housing Lender.

Nationwide Exchange Services is a leading Qualified Intermediary for Tax-Deferred 1031 Exchanges and has conducted thousands of successful 1031 Exchange transactions. It is applying advanced technologies and secure business processes to enhance standards of financial security, visibility and customer service to establish new standards for products and services in 1031 tax-deferred Exchanges.

The alliance enabled the Bank to become part of the NES team and benefited in becoming the primary financial custodian for NES in the Midwest Region. The alliance also helped the bank to offer their customers an expanded set of tax-deferred 1031 Exchange products, such as reverse and build-to-suit exchanges, at the most competitive cost structure.

The systems from NES combined with the bank Cole Taylor’s financial security and brand recognition has spurred confidence in the customers. Collaboratively, they bring distinct advantages to all 1031 customer sets, right commercial developers and corporate entities to individual investors.

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