Are you searching for ways to invest in Monterey County real estate using a 1031 exchange?
There’s no doubt that a 1031 exchange is one of the very best ways to invest in Monterey County real estate because it essentially enables you to swap one property that may be located in Monterey County or elsewhere in the United States for another without having to pay the dreaded capital gains tax.
Over the years, the 1031 exchange has remained one of the very best ways for investors in Monterey County, or elsewhere nationwide, to invest in real estate while differing their taxes.
This strategy can come with costs or steps you may not have been aware of though, that’s why in this article we will break down the 1031 exchange and provide you with examples for how it works.
Step #1 – Establish your 1031 exchange team
The first step to investing in real estate using a 1031 exchange is to establish your 1031 exchange team. This team should include a tax advisor and also an escrow company because, you’re going to need an escrow company since you have to place the proceeds from the sale of your first property into an escrow account with an intermediary until you find another property that you want to purchase.
Step #2 – Both properties have to be “Like-Kind” and qualifying properties
The key to success when investing in real estate using a 1031 exchange is that the property you invest in has to be a like-kind, qualifying property.
For example, this means that if you were to sell a 3-bedroom, 2 bath rental property in Monterey County for $600,000, you would have to invest in another like-kind property in order for the 1031 exchange to work.
Unfortunately, you cannot invest in vacant land using this strategy because vacant land does not meet the classification of being a property that’s considered to be like kind.
Step #3 – It has to be done in 180 days
Last of all, but most important, when using a 1031 exchange to invest in real estate in Monterey County or elsewhere nationwide it’s also important to remember that you only have 180 days from the moment that you sell your first property to when you invest in the like kind property in order for the strategy to work.
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