1031 Exchange Services
5M Real Estate specialize in helping property owners utilize the 1031 exchange to its fullest. We have a lengthy list of both On-Market and Off-Market assets in a variety of categories. A 1031 Exchange, otherwise known as a tax-deferred exchange, is a simple strategy and method for selling one property, that’s qualified, and then proceeding with the acquisition of another property (also qualified) within a specific time frame.
"Like Kind" Purchases
Any Real Estate property owner or investor should consider an exchange when he or she expects to acquire a replacement “like kind” property subsequent to the sale of his or her existing investment property. Anything otherwise would necessitate the payment of a capital gain tax, which can exceed 20-30%, depending on the federal and state tax rates of your given state.
Tax Deferred
The sale of a business or investment asset, whether it is real estate or capital equipment, can create a large tax liability. A properly structured tax deferred exchange under Internal Revenue Code 1031, however, allows businesses and individuals to defer the recognition of the capital gains or other taxes associated with the sale of most business or investment assets, as long as new assets are purchased to replace the existing assets. In general, most tax deferred exchanges are structured either as a real property or a personal property exchange. Real property exchanges include only interests in real property, while personal property exchanges encompass virtually all other types of property.
Diversified Portfolios
Exchanging from a larger building to several smaller properties to improve liquidity or to diversify ownership among several persons.
Consolidate or Leverage
Exchange from several smaller properties to a single larger building to consolidate ownership benefits.
Reduce Risk
When the investor pays taxes on a sale, he/she will not have access to those funds again. This increases the risk of defaulting on an investment – especially leveraged investments.
Change Property Types
Exchanging from commercial property which can’t be readily refinanced, such as land, to improved property which will support a new loan. This makes it possible to obtain cash, and trading from non-productive land to improved property can also create improved cash flow.
