103propertyexchange

Heavily used in real estate over the past few years, a 1031 property exchange provides a real estate investor with the means to avoid tax liabilities while at the same time securing a higher profile, more lucrative property. Everyone will agree that today's market conditions present challenges for the investor; financing for most has all but dried up. While even those who have been in the field for decades note the difficulty in the market, if it is possible, now is a good time for investors to think about using a 1031 property exchange to take advantage of low prices.

When an investor engages in a 1031 exchange, it is of paramount importance that IRS rules and timelines are followed. From the close of escrow on the original property, the investor has only 45 days to select properties for an exchange. The current high inventory of properties may seem like an enviable position for the purchaser. Evaluating the potential exchange properties will take time, however, and tax advantages will be lost if the investor fails to meet the deadline. Since it is advisable to identify more than one property, a knowledgeable broker can move the selection process along and guide the investor.

Part of the evaluation process in a 1031 exchange should involve a close look at the creditworthiness of a tenant. With all sectors of commercial real estate experiencing record default numbers, investors should be especially diligent in selecting properties. Creditors are insisting on tenants with the highest credit ratings on any deal financed. Input from an experienced broker is especially important when significant analysis needs to be done in a limited time period. Finding the best tenant in the beginning will help secure financing and prevent the loss of tenant income in the future.