Have you ever considered doing a 1031 exchange? Well, in order to effectively do the swap, you should exchange your property with one with the same value. The main benefit of the section is that you are able to avoid capital gains. Yes, in the future you may cash out and have to pay taxes, but until then, you can trade properties without having any tax obligation. It is a great tool real-estate investors use, so why not using it in your advantage. You have to know from the beginning that the exchange requires meeting some rules, one of the most important ones being to find a property that has the same price as yours. If you are interested in real estate 1031 exchange, then you have to make sure that you collaborate with a professional, because there are many rules and regulations that change regularly, and you have to be sure, that you will not have any issue during the process that can ruin the swap. Here you will find more details on the types of exchanges available.

Simultaneous exchange

This is the type of swap that allows you to relinquish and close in the same day. This is the original 1031 exchange, between two property owners, who are looking for an investment or business property. However, in modern times this type of exchange is not common at all, because there are very few the cases when you can find a person who is looking for a property like yours and you consider suitable theirs.

Delayed exchange

Because there are little chances the above situation to happen, you would probably get involved in a delayed exchange. This type of swap allows you to sell your property first, and find a replacement property for it in a period of time, established by the regulations. However, when you opt for this type of exchange you should expect more requirements to be involved in the process.

Reverse exchange

This is considered one of the simplest types of exchange, because it implies that you buy a property first and you pay for it later. This type of exchange requires purchasing it with all cash, and the majority of banks will not lend you the money. It is difficult to get this type of loan, because you cannot be on the title of the relinquished and replacement property at the same period.

Improvement/construction exchange

There are cases when you want to buy a property that values less than the one you want to relinquish. In this situation, you know that you will have to pay taxes for the gain on that sale. Nevertheless, because paying taxes is not an option for you, you should consider using the funds in improving or constructing the space. This type of exchange allows you to swap a more expensive property with a cheaper one, and not pay any tax, if you use the remaining funds to update the state of the replacement property.