Selling investment properties face some challenges to the owners. Capital gains tax is something that most people selling properties would wish to avoid. However, the law is very strict on this and you must make sure that you pay the capital gains tax for the property that you sell. Sometimes, business owners want to change one property to another of its kind. This situation means the once they sell the current property and pay the capital gains tax, it is a loss. They would wish to use all the proceedings into the purchase of the new property. This has been made possible through the 1031 exchange act which allows for the exchange of business of the same kind.
In 1031 exchange, you have a property, say a ranch that you want to sell so that you can buy a bigger one; you can avoid selling the property the normal route which requires payment of the capital gains tax. If you go the 1031 route, you will save money since you do not have to dispose of the asset in cash. In this case, you will sell the property through the 1031 exchange market. You declare that you want to sell a ranch in a specific area, provide its details and price. Once you make this deal available in the market, you are given time to look for a property that is of the same kind. You list the property that you want to buy and the average price you expect to pay. Once an investor who has the same kind of property that you want and you could buy it, If you find an investor who wants to buy the same kind of property that you have, you can sell it. Both the seller and the buyer need to be having properties of the same kind. Being of the same kind does not meet the exact match like a hotel for a hotel. Someone selling a hotel could buy any type of property within the hospitality industry. Get more information here!
The 1031Gateway exchange market allows you to sell the property within certain time limits. Since you could face trouble while waiting for a person who has the same kind of property, there are certain traders who come in. Their role is to make your sale easier. This is because they will buy your property in cash. However, you will not receive the cash. You will wait for a seller who has the same kind of property that meets your criteria and buy it for you.
For more facts and info about 1031 Exchange, Visit https://en.wikipedia.org/wiki/Internal_Revenue_Code_section_1031.