Top things to consider when choosing a 1031 qualified intermediary

Real estate can be considered a wealth generator. Yet, making truckloads of money isn’t that easy. You have to know what you’re doing, not to mention that you have to sell properties at a good time. Investing in assets is the best way to build wealth. But what about all those taxes? When you sell a property, or any kind of investment for that matter, and the price is higher than the one you paid for the property, you’re required to pay capital gains tax. You have no choice but to meet your tax obligations. Or do you? Thanks to IRC Section 1031, you can make a tax-deferred exchange. You will need a qualified intermediary for the real estate transaction. If you don’t know how to select one, then you should better read this article. These are the top things to consider.

 

Real estate background

It’s needless to say that you can’t choose just any qualified intermediary for the like-kind exchange. What you need is someone with a solid background in real estate, more precisely, with experience in tax-deferred exchanges. Why is this imperative? The thing is that 1031 exchanges are difficult, there being many challenges. It’s necessary to know the ins and outs of the regulations when providing DST services. What is more, qualified intermediaries need to be able to help clients maximize their investment opportunities. Do you really think that that’s easy? It isn’t, but someone has to do it. Anyway, when looking for an intermediary, make sure they don’t have a narrow background. If the person has completed very few like0kind exchanges, you should continue your search.

Where the funds will be held

The problem is that entrepreneurs aren’t always aware of the location of their funds. Simply put, they don’t have any idea whatsoever where the funds are held and this isn’t a good thing. Not only do you need assurance that your funds are safe, but also you need to know what is happening with the cash reserve. When choosing a qualified intermediary, you have to do some research. It’s recommended to talk to former clients and see how the professional has acted during the exchange period. When it comes to real estate property and, implicitly, money, you need somebody that guarantees transparency. You should be provided complete access to tax-deferred exchange information and be confident that the exchange is conducted in a professional manner.

Insurance coverage

Due to the fact that regulations vary from one country to the other, it may not be required for the middle person to have insurance coverage. This doesn’t mean, though, that you shouldn’t look into this aspect. Lack of insurance coverage means that you’re in trouble. If anything should happen to the qualified intermediary during the course of the transaction, you risk losing your money, which is the last thing you want. The point is that your funds can possibly be at risk. Therefore, inquire about coverage. You do want the 1031 transaction to be successful, don’t you? As about insurance coverage.

 

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