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Don't Commit To An Outright Sale - Start A 1031 Exchange

The process of a 1031 exchange is one that is best entered into with a certain amount of pre-planning and thought; it presents the unwary real estate investor with ample opportunity to make a misstep. Taking this into consideration, you may be skittish about beginning a 1031 exchange without a certainty that you'll be able to follow it to its end. In reality, however, the risks involved in an exchange aren't as intimidating as they may, at first, appear.

Starting a 1031 exchange is not in any way a total commitment - in all actuality, many smart investors who are selling an investment property will begin the 1031 exchange process just to leave the option of exchanging open. This is because, if an investor begins on the path of a 1031 exchange, there are several opportunities to back out and simply sell the property, while starting out with the intention of selling outright completely surrendering the option of conducting an exchange.

There's actually no reason to be afraid of the possibility of having a change of heart in the course of an exchange. The only thing you actually need to do in order to keep your options open is to stay aware of the time frames involved in the process of an exchange, as they will come to bear on when you'll have the chance to receive the money that would have been transferred to your 1031 replacement property had you gone through with the exchange.

After closing on your relinquished property's sale, the proceeds are transferred directly to your qualified intermediary. After this has happened, the first point at which you can take back your money from your qualified intermediary is after a period of forty-five days, in which time you are supposed to have identified a suitable 1031 replacement property. If forty-five days come and go and you haven't identified a replacement property, the 1031 exchange will be terminated and you'll be able to receive your proceeds. If you've identified a replacement property prior to deciding that you would like to terminate the exchange, you can just revoke that identification before the end of the 45 day period, and the result will be the same.

If you are past this stage of the 1031 process, the next opportunity you will have to collect your 1031 proceeds will be one-hundred-eighty days from the end of the 45 day period, which is the deadline for closing on a 1031 replacement property. An exception to this rule is that if your tax return occurs prior to this deadline, you can shorten this waiting period. As long as you don't ask for an extension on your return, you may, at this point, inform your qualified intermediary that the exchange has been terminated and receive your {money.

At the end of the day, it is always best to prepare for whatever contingencies may arise; starting the 1031 process when you aren't sure what the future may hold can, in fact, be a good way to keep both options available. As long as you make sure to keep aware of the time frames involved in the 1031 process, you are at liberty to back out of your exchange in the event that your situation changes.

Real Estate Investors Often Hire 1031 Exchange Companies To Assist Them With Their Real Estate Tax Exchange. More Information Is Available At http://www.Top1031Exchange.com

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