- Image via Wikipedia
1031 Exchanges are a great way to build wealth – and most importantly – you can save on taxes. How does it work? First of all – to even consider a 1031 Exchange – or what is commonly called a Tax Deferred Exchange – you must have investment property. Property that is not your primary residence.
How does and exchange work? Well in very simple terms, you start with the investment property you want to exchange, sell this property, and use all of the equity to acquire replacement investment property of equal or greater value. This action defers the capital gain tax that would ordinarily be paid, and leverage all of the equity into the replacement property.
There are many considerations and specific details to be aware of for a successful exchange. Always consult the proper advisers such as an experienced Real Estate Agent, and of course a qualified tax adviser.