1031 Exchange - Everything You Need to Know

by Andrew R. Researcher

So, you heard about deferring your capital gain taxes by investing in an nnn for sale properties. You wanted to know more about nnn lease agreements and regulations, but you found out that there is much to learn. Capital Gain Taxes, nnn leases, nnn property finders, 1031 Exchange, and you don't know where to start, correct? The matter is simple! You only want to put everything together.

What Are the Capital Gains?

Investors will sell their properties at some point. The IRS will compare its selling price with the original cost and fair value. If you made a profit, the IRS considers it a Capital Gain. And you should pay capital gain taxes for that profit.

nnn for Sale!

nnn lease agreements characterized by the lessee's responsibility to pay for three expenses. (1) Common area maintenance, (2) Property taxes, and (3) Building insurance expenses. These agreements for your properties are one condition to meet if you are willing to use 1031 to defer your capital gain taxes.

1031 Exchange to Defer Capital Gain Taxes

And this is the point. Investors can defer paying these taxes. Instead, they go for one more purchase! Yes, the obligation to pay somewhen exists, and it gets bigger, but so does their wealth! At some point, the person can pay back if they can rely on a powerful source of income, correct? And can that happen without a large pool ?!

Investors nowadays will be much more interested in finding nnn for Sale. And that's because the 1031 Exchange practice will allow them to defer these capital gain taxes under some conditions.

1031 Exchange - Pros & Cons

Pros

● Deferring Capital Gain Taxes. That's the main advantage of the practice. And that's why it is becoming more popular every day. Investors will delay paying their capital gain taxes by reinvesting in nnn properties for Sale.

● Lower responsibility. The lessee will carry the responsibility of building expenses. And that is a benefit for many investors to forget about the burden of such matters.

● Long-term rentals. Only big businesses will be interested in nnn properties. That means a stable income because these companies will rent for longer years and periods.

Cons

It is not easy to find disadvantages in delaying the payment of taxes! However, there are limitations to this approach. And it is all centralized around the difficulty that comes with the rules you have to meet to earn this delay. Here are brief explanations of these rules & regulations:

● A like property. If you want to defer paying your capital gain taxes by reinvesting in an nnn property, you must purchase a "similar unit." And there are many details regarding this matter. It is one of the biggest reasons you should contact experts such as NetLease World.

● Time Limit - Tick Tock! You will need to get done with the new purchase within 180 days! It is not a long period for many reasons. And many investors would make bad decisions and wrong purchases because the time just ticked them!

● Only For Businesses. Individuals cannot benefit from the 1031 Exchange practice because it is for business properties. However, there are always possible solutions! And individuals may be able to defer their capital gain taxes if they can contract with experts to help them with experiences and tips.

There are many possible solutions, such as creating an entity to run your properties, participating in mutual funds, and more options you don't know! In places like NetLease World, there is always an option available for you to benefit from practice 1031 and nnn lease agreements.