1031 Tax Deferred Exchanges

As your investments increase in value, you can exchange them for more expensive properties that are also more lucrative. You'll continue to receive a rising stream of income while avoiding the high taxes of capital gains.

This system allows you to get the most out of your real estate investment.

You can still enjoy the income that they produce now and you can defer taxation. However, it's important to make sure that your investments meet all of the qualifications that the IRS sets forth in order to receive the benefit.

Now that you understand a little bit about how a 1031 tax deferred exchange works, you'll want to understand how this process works well with tenant-in-common (TIC) property.

The law has allowed for 1031 tax deferred exchanges for many years. However, in 2002 the law changed allowing tenant-in-common property to be included in the deferment of capital gains tax.

This is a perfect option for someone who has a property that has increased in value and can exchange it for a portion of another property.

TIC properties will allow an investor to own part of a commercial property without having to take on the hassles of managing that property.

It's also great for someone who wants to sell a property they own, but doesn't want to leave the real estate market for good. The TIC can allow you to avoid the capital gains tax of your current property while moving to a larger, commercial property.

Not only can you invest in different types of properties, you can also invest in a larger geographic area with the same amount of money as it would cost to buy one large commercial property.

While TIC properties have often attracted investors interested in the real estate market, the advantages of 1031 exchanges makes them even more attractive.

Not only can you diversify your portfolio and have an income stream from those properties, you can also save money on taxes. The combination makes this a great investment for many people.

When you're considering a tenant-in-common (TIC) exchange, it's important to do your homework up front. This is the best time to find out if you're making a sound investment - not after you've already signed your name on the dotted line. The first thing you need to know is who you'll be working with in a TIC exchange.

Tenant-In-Common Sponsor Tennant-in-common investments are required to have "sponsors" to organize the affairs. This can be an individual or an entity that does the job of finding a property, packages the property into smaller pieces, and sells it to investors. They also have the job of securing financing for the deal.

The sponsor provides a due diligence package that provides all of the information about the property to the investors. They should give you all the information about the tenants, leases, maintenance, and management of the property. The sponsor also draws up the TIC agreement.

Accredited Investor If you're interested in investing in a TIC property, you must meet specific qualifications set out by the Securities and Exchange Commission. These guidelines have to do with your net worth as an individual investor or as a trust. You must also have a pre-existing relationship with a B/D before you can purchase TIC property.

Broker Dealer The broker dealer or B/D is responsible for finding suitable investors for the tenant-in-common. He or she is someone who is familiar with your investment history and situation and can make recommendations based on that. The B/D receives a commission from the TIC sponsor if you invest.

Registered Representative The registered representative (REP) is someone who helps the investor to understand the TIC market and the specifics about the property you're considering. If you're interested in entering the TIC market, but don't know where to start in your property search, the REP is the one who can show you as many properties as possible that meet your needs.