Lately, according to studies, more and more people have become interested in using the 1031exchange services, in order to get a more successful business. But, sometimes, this process can be somehow difficult to understand, due to the fact that there are some rules that people have to respect. And if you have not used these exchange services before, things can get even more complicated. This is the reason why, in this material, we have decided to help you by creating a small guide of easy steps that can help you change your business property with something else, which is used in the same business purpose.
First step: Understand the concept of 1031 exchange
It is true that this concept is a modern one, but there are a lot of persons who use it, especially in places like USA. In fact, a 1031 property exchange is used by successful investors who want to get rid of paying some capital gains taxes. But in order to do that, they need to exchange their property with one which can be transformed into a more successful business. And this rule is applied when it comes to family businesses too.
But be careful because you cannot change a business with a place which is used for personal purposes such as living there. Moreover, you can consider that the main purpose for a 1031 exchange is leveraging real estate. For example, if you have a property which comes with a high-maintenance, you can change it with one which allows you a low-maintenance investment, without paying any tax.
Second step: Ask for help when it comes to your family business
This is the reason why, there are also companies that deal with these services and you should definitely ask them to offer you support. Even if you understand the concept of 1031 exchange, it can be rather difficult for you to gather all the necessary documents. Not to mention that fact that if you are a business woman or man, you probably are too busy to deal with this fact. On the other hand, not everybody is suitable for using the 1031 exchange services. Therefore, it is highly recommended to see if you are qualified for this thing.
Third step: Do not lose precious time!
According to experts, there is no time to lose when it comes to exchange properties, due to the fact that studies show that 2016 and 2017 and the proper years for using 1031 properties. And even if things can seem complicated, with the help of some good professionals they will prove that they are not so. And take advantage of the fact that exchange properties are “like-kind”. This means that you are able to change an apartment which is used for renting services with a ranch, if the owner agrees the deal.
Fourth step: Make the new business a very profitable one!
If you were lucky enough as to make a good change, do not forget to make a good plan and transform the new business into a very successful one. Another good idea is to use the concept of “construction/ improvement exchange”. And in order to understand how things function, here there is a good example. If you change your property with one which is has a lower value, you can use the remaining funds to improve it.