Investing in 1031 exchanges(nnn Exchange) of properties occur through four basic structures:
- Simultaneous Exchange, which involves a direct swap – one property for another – or;
- Deferred Exchange in which the previously owned land is disposed of and can be replaced by like-kind properties (within a stipulated time period);
- Reverse Exchange, which is very complex and only can be conducted with the help of a Qualified Intermediary;
- Improvement Exchange, by using proceeds from a 1031 exchange to improve an existing replacement property or to build a new replacement property(nnn real estate).
Not all kinds of properties qualify under a 1031 Exchange (nnn leasehold). The foremost qualifying criterion for a replacement property is that the property (Triple Net Investment property) should be in use for business, trade or investment, and cannot be for personal use(nnn real estate). The grade or quality of a replacement property can vary but its character and nature should be similar to the property being relinquished.
Note that investing in 1031 Exchanges ensure the deferral of capital gains taxes, potentially higher rates of return via replacement properties(Triple Net Investment property), and zero or minimal “depreciation recapture” where the dollars can be larger than deferred capital gains, and ultimately greater asset prices which leads to greater investment power(nnn leasehold, Triple net real estate).
If you are considering or already involved in a 1031 Exchange, call your advisors at the Triple Net Investment Group today, for unbiased, expert insight into your transaction.
