The exchange of an investment property is a transaction that can bring you some serious tax deductions. The process is quite simple, and for the moment is available only for properties of the same kind. To find out more about this and the meaning of the “same-kind property” keep on reading this articles. You will definitely find precious information that can help you gain a lot of money from property investments.
Like-Kind Properties and Exchange of an Investment Property
Investment properties are of the same kind, if they are of the same nature, even if they differ in grade or quality. Personal properties of a similar class are like-kind properties. However, personal and commercial properties are not like-kind properties. Also, personal property used predominantly in one country and personal property used predominantly in another country are not like-kind properties.
Exchanges are made for people wanting to stay invested in real estate, increase their leverage and to avoid paying high taxes upon the sale of property. Why do people prefer the exchange of an investment property? Well, there are several reasons:
To restore depreciation by exchanging one property for another of greater value.
The exchange of an investment property can be used to combine the equity of several properties into one large investment.
In some of the cases, investors choose exchange properties just to change the investment location (and this could be made for other several reasons, such as appreciation possibilities).
These are the different types of properties that can be involved in exchange investments: rental houses, apartments, commercial properties, raw land, office buildings, retail properties, ranches and industrial properties.
A Successful Tax Deferred Exchange
Here are the things that must be done to gain some tax money from an exchange of an investment property. First, to make sure your investments are compatible for this type of action, ask for professional advice from a financial advisor. After that, and after you list the relinquish properties, you can enter in contact with the buyer for the exchange or sale of the property you wish to relinquish.
Once you do that, open an escrow for the relinquished property and coordinate with the facilitator. All the exchange papers must be signed by all parties or the transaction will be considered invalid.
You will be guided for the rest of the transaction by the investment property exchange facilitator. The rest of the process is straightforward and involves a lot of paperwork, but the benefits are worth seeing it through.
Whether you want a more valuable property, or just want to have a property in another place, just remember that these can be done with no taxes involved. Just ask for the help of an investment property manager, and he will give you more details on how to conduct an exchange of investment property transactions.