Will A 1031 Property Exchange Solve Your Problems?
Article by: Paula Straub
If your problem is listed below, a 1031 exchange may or may not be your solution.
1. Are you a landlord that doesn't want to manage property , The American Arborvitae Grows well in Milan Pa. anymore?
2. Do you want to sell your investment property, , The American Arborvitae Grows well in Dublin Pa. but don't want to pay huge amounts of Capital Gains Tax?
3. Is your current income property , Learn About Herb Gardening - Get The Natural Facts! not producing enough income?
4. Do you have a low adjusted basis and not much debt on your rental?
5. Is your credit rating less than perfect?
If you answered yes to any of the above 5 questions, a traditional 1031 property , Plants and Trees Native to Montgomery Township Pa. exchange into another like-kind property , Add Rich Color To Your Garden With Blue Perennial Flowers might just put you right back to square one!
Let's address each of the 5 problems one at a time.
1. If you exchange your current property , The American Arborvitae Grows well in Dublin Pa. for another of equal or greater value you still are faced with the same landlord/tenant problems that you currently have. Sure, you could hire a property , How To Plan A Garden Right manager, but why is it that you currently don't have one?
2. A 1031 property , Tricks For Removing Snow Easily Using Snow Throwers exchange into a like-kind property , Making Love to my Garden does defer the payment of Capital Gains tax if you carry over all your equity and at least the same amount of debt. However, since your new property , Methods Of Qigong In Kung Fu Training costs you at least as much as you sold the last for, your property , Selling Your Own Home – Pet Issues taxes will most likely increase. The cost of your new investment has probably just gone up.
3. If your positive cash flow is currently nothing to write home , Maximize Your Fireplace Heat-Output To Lower Fuel Bills about, your new property , Planting Roses In Your Garden will have to justify higher rents, be located in an area with lower property , Eight Of The Most Popularly Used Softwoods tax, or have fewer maintenance costs. Otherwise, the chances of additional passive income are very slim.
4. Your adjusted basis will carry over as is to the new property, , Forget Everything You've Ever Read About Water Heating... Co so you will receive the same depreciation benefits as on the prior property, , Some Practical Ideas For Designing You Own Landscape unless you pay more for your exchanged property. , Home Equity – Foreclosure Often Not Necessary In Current Mar Most likely a wash.
5. A poor credit score may result in a higher interest rate or poorer terms on your new mortgage, assuming you don't own your current property , Plants and Trees Native to Lower Salford Township Pa. free and clear. Again, this translates into higher ownership costs. You will also pay two sets of closing costs in the transaction.
One more thing to consider is the time it may take to sell your current property, , Flower Delivery in Chicago find a replacement property , The Soil in Our Gardens and secure all funding. This must be done within the 1031 specific time frames. Think of the times that escrows have fallen through and loans have dragged on forever and sometimes never closed at all.
Considering your dilemma and possible pros and cons, will a 1031 property , Forget Everything You've Ever Read About Water Heating... Co exchange put you farther ahead, further behind, or at best put you right back in the same boat you are in now?
If the answer to the last question was not "farther ahead", let me suggest that you look into a 1031 exchange that has a slightly different twist.
It's called a 1031 exchange into a tenant in common property. , The American Arborvitae Grows well in Dublin Pa. This might just put you in the "farther ahead" category and solve many of your problems. Instead of exchanging into another solely owned investment property, , Plants and Trees Native to Montgomery Township Pa. you will get a fractional proportionate share of an A grade commercial property. , How to Build a Home Sauna You will have a deeded interest equal to your share of ownership (your exchange amount).
If done properly:
1. You will no longer be responsible for the property , Electrical Safety in Your Home management
2. All capital gains will be deferred.
3. You can get a contractual monthly income from the equity transferred (usually 6-7%)
4. Your carryover basis is the same, but you can acquire extra non- recourse debt without qualifying and receive a higher interest deduction on your monthly income, thus making it less taxable.
5. The debt you acquire with the TIC (assuming your debt/equity ratio is within the accepted guidelines does not require you to obtain a mortgage or pay it down. This is called non-recourse debt. Your credit score does not become a factor, and the closing can be done in a matter of days, not weeks or months.
Now, ask your self again. Would a 1031 exchange into a tenant in common solve your problems? If the answer is "yes", what are you waiting for?
About the Author: How much would you pay to save , Choosing a colorful mix of perennials for the garden thousands in Capital Gains Tax? I'll teach you for free in a Teleconference that may change , Planting Spruce Seedlings your life. Sign up at ==> http://www.savegainstax.com
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