1031 Property

Usually, real estate investors will just exchange their properties instead of acquiring a new one because they want to avoid paying the federal tax and other forms of taxes that are associated with getting a new property.  But to do these exchanges, they would need the help of a 1031 exchange company that will intermediate between the buyer, the seller, and the government. Getting the services of a 1031 exchange company will ensure that your transaction will qualify for the 1031 exchange benefits.

But you need to be aware that the 1031 exchange company will be the one who will hold your funds so it is important to get the services of a reputable 1031 exchange company. There have been shocking stories about intermediaries using investors’ funds to invest in different kinds of schemes and in some cases, they weren’t able to pay their clients back in time. You should also note that these exchange companies are not governed by the federal government so it is hard to go after them in case of problems. For this reason, it is important to know more about these types of companies and why you should trust them in the first place.

There are basically just three types of 1031 exchange companies. The first kind is the division of an escrow company. An example of this kind of company is the First American Exchange Company or FAEC, which is a subsidiary of the Limited Liability Company or LLC. The second kind of 1031 exchange companies are banks; Washington Mutual, for example, has this service in their portfolio. But not all banks offer this service to their clients.  The last kind of 1031 exchange companies are the ones that truly specialize in this industry. These companies may either have a single central branch or a lot of franchise branches throughout the country. Examples of companies that specialize in 1031 exchange are Equity Preservation and Equity 1031.

The fees you should expect from these companies would vary from $200 to $750. However, there are different conditions for these transactions. For example, companies such as Washington Mutual charge you a mere $200 for you to take advantage of their services. But this company would not pay you interest rates when keeping your money with them unless it reaches a certain amount. This company may be a good option if your funds that are held there are not significant, but if your investment reaches several hundred thousand dollars, it might be a good idea to consider other options.

On the other hand, there are companies that offer to pay you at the savings account rate while other 1031 exchange companies will offer to pay you at the money market rate. The company you should choose should be dependent on your preference and the level of risk you want to take. As you can see, choosing a 1031 exchange company that will handle your transaction is an important consideration in itself. So you must look around and find the best 1031 exchange company that will suit your needs perfectly.