An Orlando Fl 1031 Like Kind Exchange is done to defer taxes on the selling of your property. A 1031 Exchange is often referred to as a Starker Exchange because unless you find a property you want before you sell yours most likely you perform a Starker Exchange. According to Forbes Magazine the vast majority of exchanges are Starker Exchanges which are three party or also known as delayed exchanges. These are referred to as "Starker" exchanges after the legal case which allows them. As of 2017 most Like Kind exchanges are now limited to real property so says the IRS.
The Improvement or Construction Exchange is an exchange which allows the exchanger to spend any "exchange"equity acquired improving the replacement property. However all of the improvements must be performed and the transaction take place before the 180 day window closes. Normally these improvements are completed while the replacement property is in the hands of the Qualified Intermediary.
We are not accountants. Make your decisions based on your knowledge and professional legal and financial adviser. Some of the important things to consider are below if you are wishing to defer all of the gain acquired from the sale of your relinquished property.
The Delayed Exchange is the most common exchange. This exchange involves selling the relinquished property, finding a new property within 45 days and closing on the new property within 180 days. Obviously there are numerous benefits to performing these types of 1031 exchanges which is why they are now so popular. The exchanger must sell the original property and have a Qualified Intermediary hold the taxable proceeds until the successful purchase of the replacement property. A Qualified intermediary is a "Safe Harbor" and great care must be taken selecting one.
Buy first, sell later aka a "Forward Exchange". If you have a great property in a very marketable location this may be a good choice for you however they are more complicated than they appear at first glance. Banks do not like lending money on reverse exchanges possibly due to the failure rate. Consider this type of exchange if you are prepared to go "all cash".
Same day close. A Realtors dream and basically what this type of exchange represents. The downside is if anything happens to keep the properties from exchanging on the same day then taxes will apply. As a Realtor and having decades of experience in Real Estate I can tell you "stuff happens". However experience and being proactive can prevent much of it. Here are the ways that this exchange is normally carried out.
Cash Boot- The fair market value or money received in the exchange.
Mortgage Boot- additional mortgage amount left over from the first property that is not replaced by the acquisition of the second.
Reduced Basis,200% Rule and the 95% Rule- Ask your accountant or attorney. These matter.
If you are considering an exchange contact us. We would love to assist you. Central Florida is a large place and a great place to have investment properties. Hopefully very soon you will be looking back on a successful Orlando Fl 1031 Like Kind exchange.