The Importance of Involving an Experienced Lender in the 1031 Exchange Process

There are many important players that you want to involve in your 1031 exchange. In this article, we are going to explain why it’s so important to work with a nimble, creative lending on your 1031 exchange of real estate.

1031 Exchange Rules & Benchmarks

When you’re doing a 1031 exchange you typically try to buy a property of equal or greater value, you try to reinvest all of your equity into the new property, and to the extent that you paid off debt on the old property, you want to offset the debt relief that you enjoyed on the sale with new debt of at least equivalent value.

Entrepreneurial people are often not happy making an unexciting lateral move between investment real estate. Rather, savvy investors often try to build their wealth by levering up and exchanging into a more expensive property using their debt plus the equity they’ve accumulated in their relinquished property.

Having a creative, nimble lender who can create these opportunities and finance these acquisitions is absolutely essential to a successful 1031 exchange.

1031 Exchanges of Commercial Real Estate

CPEC1031, LLC offers 1031 exchange services to clients throughout the state of Minnesota and across the United States. Our team of 1031 exchange officers has over two decades of experience working on like-kind exchanges of real estate. Let us put our experience to work on your next 1031 exchange. We can help guide you through the process and make sure all of your questions are answered along the way. You can find us at our Minneapolis offices to learn more about our services and how we can help!

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

1031 Exchange Challenges in a Hot Seller’s Real Estate Market

We recently worked with a married couple on their 1031 exchange who were selling depreciated properties (two duplexes) in Minneapolis that they’ve held for over twenty years. The couple wanted to exchange these properties in a 1031 like-kind transaction. The husband wanted to buy new property in Hawaii, while the wife wanted to buy a new property in Florida. Their plan was to initially use this new property for investment or business purposes. Long-term, however, their goals may change and they may wish to transform that property to personal use (after a substantial period of using it for investment or business).

Challenges in a Hot Seller’s Market

The biggest challenge that this couple faced was that both real estate markets in Hawaii and Florida are currently hot. In any 1031 exchange, it’s really important to try and find your replacement property early in the process. That way, when you sell your appreciated relinquished property, you’ve got a sure thing. If you wait until late into the 45 day identification period, you might be stuck without a chair to land on.

Important 1031 Exchange Deadlines

When you sell your relinquished property, you have two important deadlines. The first deadline is the 45-day identification period in which you must make a written designation clearly describing your replacement properties. The other deadline is the 180 day exchange period in which you have to close on your property and receive the title to the property. 1031 exchanges are all about exchanging real property for other real property. These deadlines constrain and limit the process.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

Consider Your Initial Intent when Doing a 1031 Exchange

When you 1031 exchange into a property, you need to intend on using that property for investment or business use in order for the exchange to be valid. But what if you want to move into the property yourself at some point in the future? In this article, we are going to talk about the importance of having the right initial intent with your 1031 exchange and some considerations when moving into a 1031 property.

Consider Your Initial Intent

In any 1031 exchange, when you initially acquire a property your intent must be to hold it for investment or business purposes (lease it out, put it into a rental program, or otherwise hold it for business purposes). That being said, your long-term intentions when buying a property may be indeterminate. When you buy a property with the intent of renting it, you may not know if you’re going to continue renting it ten years down the line.

But it’s extremely important to the success of your 1031 exchange that when initially purchasing the property, your intent is for qualified use (investment or business purposes). You want to make sure that you walk like a duck and talk like a duck so that the IRS perceives you to be a duck.

We have seen clients get audited after moving into a 1031 exchange property. Make sure everything you do is above board and that you can prove that the property was used for investment or business for a substantial time before you even think about moving into the property and using it for personal use.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

What is a 1031 Exchange of Investment Real Estate?

In this article, we are going to get back to basics and explain what exactly the 1031 exchange of real estate is and how it can be beneficial to taxpayers investing in real estate.

What is a 1031 Exchange?

A 1031 exchange is a code section in the Internal Revenue Code that allows people to defer their gains on their appreciated real estate that’s been held for investment or business purposes when they do an exchange into like-kind property that’s also held for investment or business purposes. What that means you are realizing but not recognizing the gain on your sale. In other words, the gain is not currently taxable.

Typically, when you sell an investment property in a standard sale, you will likely have a taxable gain on that sale because you used it for the purposes of generating income. But if you exchange out of your property and into like-kind replacement property, you can defer that capital gains tax burden. This allows you to compound and build your wealth in real estate over time as you can continue to exchange into bigger and better replacement property.

CPEC1031, LLC

At CPEC1031, LLC we have over two decades of experience facilitating 1031 exchanges of all shapes and sizes. We can put our experience to work on your next 1031 exchange and answer all of your questions along the way. Contact our team of qualified intermediaries today to learn more about our full service capabilities and see how we can help you with your 1031 exchange. You can find us at our offices in downtown Minneapolis.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

1031 Exchanges can Help you Take Advantage of Appreciation in the Marketplace

In this article, we are going to talk about how a 1031 exchange can help you reposition your real estate strategy and take advantage of future appreciation in the marketplace.

Inflation Concerns

People are rightly worried about inflation right now, but inflation makes real estate investors look like rock stars because as the value of currency declines against the value of hard assets like real estate, your appreciation in the property goes up.

Repositioning Your Strategy

Many people are repositioning their portfolios by moving to different geographic areas that perhaps have more favorable tax codes. These taxpayers are looking to move their capital to those geographic areas where there will be more opportunity for appreciation. Everyone has a different strategy when it comes to real estate investing and this is a great time to reposition your strategy to take advantage of future appreciation.

A 1031 exchange is the perfect tool for this type of repositioning as it allows you to move your capital around to different geographic areas tax-deferred so long as you satisfy the various 1031 exchange benchmarks.

Minnesota Qualified Intermediary Company

CPEC1031, LLC is a qualified intermediary company that facilitates 1031 exchanges of investment real estate. We can help you defer your capital gains taxes on the sale of real estate under section 1031 of the Internal Revenue Code. Contact our team of 1031 exchange professionals today to learn more about the benefits of section 1031 and whether or not your property meets the criteria for a 1031 exchange. You can find us at our main office located in downtown Minneapolis.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved