1031 Exchange Loans in California
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$200K to $2M
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Usually, when selling a property, you will be taxed on the capital gains from the sale.
In a 1031 Exchange, an individual or corporation exchanges a "like-kind" investment property for another property of equal or greater value (you can also exchange multiple properties).
When done under Section 1031 of the IRS tax code, you can defer paying any capital gains tax into the future.
This allows you to grow your investment, which is essentially tax-free.
This process can be repeated an infinite number of times until you decide to realize your gains.
This popular and powerful investment tool should be in every real estate investor's toolbox.
Once a real estate investor has sold an investment property, they have 45 days to inform a qualified exchange intermediary in writing about a particular property they plan to purchase.
Failure to inform the intermediary within the 45-day time frame results in an invalid exchange, and the investor will not be able to reap the 1031 exchange tax benefit.
From the date the property is sold, a 180-day countdown begins.
This 180-day timeline runs concurrently with the 45-day rule.
By the 180th day, the title of the replacement property must be completely transferred into the investor's possession.
Because of these timelines, a hard money loan is often used to bridge funding gaps and accelerate the purchase of the replacement investment property.
If you are running out of time, we can provide you with a bridge loan to complete your transaction and be compliant within the 180-day deadline.
The replacement property is often of much greater value than the one being sold.
When investors exchange for more expensive property, they may need a short-term hard money loan to finalize the deal if they do not have the required funds.
Once the 1031 exchange is completed and the investor owns the new property, they can refinance into a more traditional, lower-cost bank loan.
I’m a commercial real estate broker and do some fix n flipping on the side here in SoCal. I’ve used a few different HMLs in the past but have created a good relationship with these guys and have repeatedly used them and will continue to do so going forward.
A 1031 exchange cannot be extended under any circumstance or for any hardship. The only exception is in the case of a presidentially declared disaster.
This is a gray area. 1031 exchanges are not to be used to purchase a property to sell it for a profit.
If you buy a property, rent it out, make some improvements, and then sell it a few months later, it could qualify for a 1031.
Renting the apartment and collecting income shows the IRS that the property was used as an investment.
Yes.
No. A primary residence cannot be used for like-kind exchange.
No. A primary residence, secondary residence, or vacation home does not qualify for a like-kind exchange.
1031 exchanges cannot be used for stocks, bonds, or notes.
Yes, as long as you, as the real estate investor, do not touch any funds.
Yes, as long as you, as the real estate investor, do not touch any funds.
You should speak with a certified 1031 exchange specialist to ensure you qualify for deferring your capital gains taxes.
Under the current IRS tax code, the number of 1031 exchanges an investor can perform is unlimited.
Yes, a 1031 exchange can only be used for investment properties. It cannot be used for a primary residence, a secondary residence, or a vacation home.
The relinquished and newly purchased properties must meet certain IRS criteria to qualify for a 1031 Exchange. Here are some guidelines:
There are 2 time limits to a 1031 Exchange:
The 45 Day Limit
You have 45 days from selling the relinquished property to identify potential replacement properties.
The IRS stipulates that these properties must be identified in writing, signed, and delivered to a person involved in the exchange.
Either the seller of the replacement property or a qualified intermediary would qualify.
Your real estate agent, accountant, or lawyer is not a qualified intermediary.
The 180-day Limit
The exchange must be completed within 180 days of the sale of the relinquished property. At this time, the second replacement property must be completely purchased and received, and the exchange must be completed no later than 180 days after that.
Individuals, C corporations, S corporations, partnerships (general or limited), limited liability companies (LLCs), trusts, and any other tax-paying entity, including owners of investment and business properties.
A qualified intermediary, or an accommodator, is a company or person that holds the funds in the transaction until they can be transferred to the seller of the like-kind exchange property.
Federal capital gains taxes can take between 20% and 40%. State capital gains taxes can be 0% if you live in states such as Texas or Washington.
Depending on your state, capital gains taxes can be between 20% and 40%, and a few states have no capital gains tax.