The Realized Team’s Picks
Uses and Risks of Using Zero Cash-Flow Properties in a 1031 Exchange
A 1031 exchange is a tax-deferred transaction that can be used to postpone capital gains tax liability when selling and purchasing qualifying real estate. As you purchase a replacement property, there are plenty of options available to find the asset that suits your investment goals. One of these choices is the niche category of zero cash-flow properties. These are highly structured investments where you don’t earn any extra profit, but the income is paid to cover the property’s debt.
Can You Use Multiple Qualified Intermediaries in a Single Exchange?
When conducting a 1031 exchange to defer capital gains, you will need to work with a qualified intermediary. This step is required by the IRS since the intermediary plays a central role in helping the transaction meet regulatory requirements. What if your exchange involves properties in different states or multiple properties? Can you use multiple qualified intermediaries in a single exchange? The answer is yes, but this is generally only applicable in specific scenarios. Below, Realized 1031 has shared when this practice may be considered and the reasons it might be used.. Let’s take a closer look.
Reverse Vs. Forward 1031 Exchanges: Pros and Cons of Each Type
There are a few different ways to conduct 1031 exchanges, potentially deferring capital gains taxes. Named after Section 1031 of the Internal Revenue Code, these exchanges allow investors to reinvest the proceeds from a property sale into a like-kind asset, maintaining their investment without incurring any immediate tax liability.
1031 Exchanges and ESG Investing: Opportunities and Limitations
Many investors today have shifted their focus not only on financial returns but also on the broader impact of their investment strategies. That said, environmental, social, and governance (ESG) factors are increasingly influencing investment decisions for some. For those seeking to align ESG goals with real estate holdings, one potential avenue includes the use of 1031 exchanges.
Dividable Real Estate Assets for Balanced Estate Plans
Advisors helping clients with estate planning often encounter a familiar challenge: dividing real estate equitably among multiple heirs. Unlike liquid investments, real estate assets are traditionally indivisible, illiquid, and emotionally charged. These characteristics can complicate an otherwise well-structured estate plan, leading to potential family conflict, valuation disputes, or forced property sales.
Can DST Investments Be Liquidated Early?
Joining a Delaware Statutory Trust (DST) can offer passive exposure to real estate and potential capital gains tax deferral when used in conjunction with a 1031 exchange. For some investors, there’s always the lingering question regarding liquidity, or your ability to exit the investment and cash out. Can DST investments be liquidated early? The answer is more nuanced than a simple yes or no. While most DSTs are liquidated only after the end of the holding period, there are certain scenarios when early liquidity can happen.
Can You Recover a Failed 1031 Exchange? Steps and Considerations
A 1031 exchange is a tax-deferred transaction that allows investors to reinvest proceeds from a real estate sale into a like-kind property. If you’re unable to comply with any of the rules the service mandates, you could end up with a failed exchange and a large tax bill. Is there anything you can do if such an event happens? Can you still recover and delay capital gains taxes? The answers depend on the specifics of the failed exchange. Below, Realized 1031 has shared an article outlining potential causes of failure and what to consider if an exchange does not go as planned.
How Inflation May Influence 1031 Exchange Strategy
One of the most persistent economic realities investors must account for is inflation. This phenomenon impacts everything, from grocery prices to real estate. As you navigate the ups and downs of inflationary periods, it’s important to consider how various financial strategies may play a role in preserving purchasing power and supporting long-term planning. One such strategy is the 1031 exchange.
Navigating a 1031 Exchange in a Bankruptcy Situation
1031 exchanges are complex transactions that can offer tax deferral opportunities for investors seeking to reposition into new real estate sectors. The process is governed by strict rules and timelines—and when bankruptcy enters the picture, those layers of complexity increase.
How 1031 Exchanges Support Multigenerational Estate Planning
Estate planning is about more than just transferring wealth; it’s about preserving legacy, reducing tax friction, and how assets may align with long-term family objectives. For clients with investment real estate, 1031 Exchanges can be a component of strategies designed to align current real estate decisions with future estate planning goals.
