“Hi Gary. I’d like to sell our rental condo and buy another property. I’ve heard about tax deferred 1031 exchanges, but they sound difficult and complicated. What do you think?”
You’re right, they sound difficult and complicated. But the good news is that they’re easy and simple!
Here are the most common fears (actually myths) I hear about 1031 exchanges:
- Too Complicated
As mentioned, they’re pretty simple. You just follow a few required rules on prices, timing, and where the funds are held. But a good Realtor, escrow, and 1031 “Accommodater” do all the paperwork for you.
- Too Expensive
A standard 1031 exchange costs around $1,000. That’s not a lot of money compared to all the taxes you’ll save.
- Not enough time
The main time constraint is that you must “identify” the property you want within 45 days of closing the property you’re selling. But if you start looking while your “old” property is in escrow, that effectively stretches it to 60 or 75 days. That’s usually plenty of time.
If you’d like to do a 1031 exchange or learn more about them, contact me and I’ll be happy to help you.
By the way, even though they’re simple, I’m still required to tell you to consult with your tax or legal professional.