The four stages any entrepreneur goes through   

The four stages any entrepreneur goes through   

Running a business is not something easy to do and while some people manage to succeed although they do not have a lot of experience, others may fail even if they are More »

Steps to starting a small business

Steps to starting a small business

If you are interested in setting up your own business, then there are a few important steps to follow in the process. Because the business world is highly competitive, it is more More »

Keeping your social media fans engaged – how to attract new followers

Keeping your social media fans engaged – how to attract new followers

Considering that social media marketing is more popular than ever and can have a very important influence on the success of a company, managers will need to always be careful with their More »

 

Mistakes people usually make in 1031 exchange

A 1031 exchange brings together two investors who are interested in swapping properties or assets that are considered similar and in deferring capital gains taxes, but if this exchange is not executed properly, it might result in some big tax consequences, which will also affect investment goals. If you want to find out more about 1031 exchange or come in contact with some professionals in this domain, websites such as https://www.kbexchangetrust.com can be a real help to you. Here is a list of the most common mistakes people usually make when it comes to this type of real estate exchange.

 

Overpaying for replacement property

Probably one of the most common mistakes people are prone to make when it comes to 1031 exchange is paying too much for the replacement property. When alerting a broker or seller about your interest in a specific replacement property, they might raise the price a little bit, especially if they know you are on a very tight deadline. Having some well-established criteria in mind before making the transaction is the key to a successful deal.

Not selecting a qualified intermediary

It is highly important to pay great attention when the time to select an intermediary comes, because you have to make sure it is a qualified and professional person. Choosing the wrong middleman can cost you a great deal of money, so it is important to do some detailed research on the internet and ask for other people’s opinions regarding certain intermediary people before resorting to one.

Not setting up the 1031 exchange properly

The 1031 exchange can be seen as both a tax transaction and a real estate transaction and in case the exchange is not executed properly, it can have some serious tax consequences. In order to avoid any unpleasant situations from happening, it is recommended to resort to the services of a real estate lawyer or an exchange company that will handle the paperwork on your behalf.

Not paying attention to the deadline

The moment you close the deal you have 45 days during which you have to present the intermediary the details on the replacement property you are interested in. It is highly important to have everything worked out within this period, because otherwise the property you are interested in might be sold to someone else.

Negotiating the wrong terms

Another big mistake people are prone to make in the 1031 exchange is related to negotiating the wrong terms. It is worth mentioning that market terms are in continuous change and buyers who have vast experience in the domain know that determining the context of the purchase and constructing a deal have to be done quickly and taking into account the right terms in order to avoid ruining the deal.

Thinking that 1031 exchange will get you rid of taxes

As it was previously said, the 1031 exchange helps investors defer taxes and not eliminate them. Investors have to be careful when dealing with this type of exchange because it might affect their budget by subjecting them to much higher taxes if the exchange is not executed accordingly.