Choosing a Replacement Property in A 1031 Exchange

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If you have a business property in use, you can exchange it for a like-kind property, like an apartment building or a shopping center. Section 1031 of the IRC allows businesspeople to defer capital gains taxes on real estate trades. Yes, it is within the law. This is a popular investment tool amongst businesspeople. No one in the real estate circles wonders what is a 1031 exchange California. By doing a like-kind exchange, you can defer paying capital gains tax and you recharge your portfolio. When it comes to completing 1031 tax-deferred exchange, you have to meet strict requirements. One very important requirement that needs to be met is finding a replacement property. When looking for a replacement property, it is essential to take into consideration the following aspects.

Water Quality

A common concern among buyers of real estate is water property. If there is evidence of high water drinking quality, the equity’s marketability and appeal significantly increases. Groundwater testing is absolutely necessary. It will provide indication of pH, water hardness, the presence of bacteria or sodium, fluoride, iron, and magnesium. While there is no denying that location is the most important factor in real estate, water quality is just as important.

Healthy Living Environment

Homeowners are placing more and more emphasis on health. So, if you are planning to rent the real estate property, you should better make sure that it offers a healthy living environment. Do not trust everything the real estate agent tells you. Do some investigating. The first thing you should be looking for is mold. Mold grows silently in buildings and it poses serious health threats. Since most of the times mold is not visible, have an inspection performed. While you are at it, test the building for is asbestos. When inhaled, asbestos causes cancer. If the building is older, you can be sure that it contains traces of asbestos.

Equal Market Value

When searching for a replacement property in a 1031 exchange, do not forget about market value. Keep in mind that you have to find an equity with an equal market value (even greater). Otherwise, you will not be able to complete the like-kind exchange. To make matters simpler, hire a real estate agent. A professional will be able to explain the value of the green property and how much it is actually worth on the real estate market.

Environmental Features of the Neighborhood

The environmental features of the living neighborhood are very important. what you need to do is get details about pollution statistics. You need to know how clean or polluted the air is and what effects it can have. You can find thorough pollution reports online, highlighting everything from chemicals to water. 

Starting on the closing date of the relinquished property, you have 45 days to find a replacement property. When in the market for a real estate asset, think about the afore-mentioned things. If you are going to swipe properties, get one that is green. Going towards green will greatly benefit your business.