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Bank Of America Investment Do you have your savings in an investment property that is not performing for you? Perhaps you are positioned to make capital gains on the property but for whatever reason the property just doesn't fit your investment scheme, yet you are unsure how to get out of the property without paying taxes on the capital games. If this is the case, then it is time you learned about the or a 1031 exchange and a commercial bridge loan. In a nutshell a 1031 exchange will help you avoid taxes on the sale of the property so long as you are willing to reinvest the money in a similar property and the bridge loan will help you close quickly on your next property.

As a real estate investor, you probably are aware of the advantages of a 1031 exchange over outright sale of a property. An exchange defers your capital gains taxes, keeps your money working for you, and helps to build equity and maximize your returns. But 1031 exchanges are allowed not only for the good of the investor; by allowing investors to move their capital to the most advantageous investments, section 1031 stimulates the U.S. economy.

Investment Opportunity The term 1031 exchange comes from the Internal Revenue Service's dictionary. The 1031 exchange basically outlines the scenario whereby you can sell your real estate property and avoid any taxes on the capital gains. As always, there is a catch. First, to avoid taxes on the capital gains you must reinvest the money into another property within 45 days of selling the original property. Additionally, you cannot just purchase any old property that you find attractive. Rather, the 1031 exchange rule says you must purchase a property that is of "like kind," or very similar to the real estate property you sold. If you fail to meet these conditions then the capital gains made on the sale of the original property will be taxed by the IRS.

If 1031 exchanges are limited to the U.S. so that the economy will benefit and the IRS will be able to collect capital gains taxes in the future, then you may be wondering what rules apply to U.S. territories such as Guam, the U.S. Virgin Islands, and Puerto Rico. In private letter rulings, kind in an exchange with a U.S. producing, kind exchange, which merely state that the property must be held for your trade or business or as an investment.

Banc Of America Investment So a 1031 exchange helps you avoid taxes when you sell a property, but how do you go about selling one property and purchasing another property in a span of 45 days? The answer to the time issue is the commercial bridge loan which is sometimes referred to as a mortgage bridge loan. A or a bridge loan is designed to serve as a temporary or short term loan and lends itself to quick closings. Thus the commercial bridge loan is ideal when you are performing a 1031 exchange and only have 45 days to close on your next property. Without the speed in closing that a mortgage bridge loan offers, you jeopardize your standing as being qualified for the 1031 exchange exception. Since the IRS is very unforgiving and not prone to extend the time period of 45 days to close on the next property, it is in your best interest to play it safe and use a bridge loan so that you can close on time with your next real estate investment.

Posted by Taxemous Exchangemous on September 4, 30pm. Previous Post View Blog Posts Section 1031 of U.S. tax code is based on the idea of a mutually beneficial relationship between the real estate investor and the U.S. economy as a whole. 1031 exchanges allow investors to put their capital to work in the most advantageous ways possible, which in turn stimulates the economy by creating more jobs and greater opportunity in the U.S. This is one major reason why 1031 exchanges cannot occur outside of U.S. territory. In addition, a tax deferment means that the IRS will want to collect your capital gains taxes in the event that you someday sell your replacement property, and it can be very difficult for them to collect taxes on the sale of foreign property.

Banking Investment Since such bridge loans are designed to serve as short term financing, your commercial lender will be more than willing to help you roll your or a mortgage bridge loan into a more permanent mortgage loan on the property. Obviously short term financing should not be used to finance long term debt so it makes good financial sense to book a mortgage loan on the property when you are able to do so.

The reasoning behind the prohibition of 1031 exchanges involving property in a foreign nation is clear, but things become a bit more hazy when you consider U.S. territories such as Puerto Rico, Guam, or the U.S. Virgin Islands. You are in fact permitted to make an exchange on a property in one of these territories, but it is essential to be cautious when making a transaction of this sort.

Investment Solution Strategic With this knowledge hopefully you can become a more potent player in the real estate market by taking advantage of the 1031 exchange to move from good investment properties to great investment properties. More than likely your commercial lender will be more than happy to help you out in this process, ensuring that you are able to secure a or a commercial bridge loan to assist you in closing on the first property and purchasing the next piece of real estate as quickly as possible.

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Investment Banking Services Adam Smith is an informational author for 10X Marketing. For more information on acquiring a commercial loan or a commercial mortgage for your investment property please visit SNCLoans.com

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