1031 Exchanges
Get the highest value from your commercial or multi-family property.
Hilliker and Westwood Net Lease Advisors can help you roll your profits through a 1031 Exchange.
St. Louis Commercial Real Estate Investors: Make the Most out of Your Next Transaction
Have you done the hard work of accumulating wealth for yourself and your heirs through commercial real estate? If so, you contribute a vital service to the St. Louis metro area. You provide space where businesses can thrive, creating jobs and helping to grow our regional economy.
As a reward the government provides unique tax incentives to help you grow in prosperity for the sake of our region.
Don’t let opportunity pass you by! If you’re selling a commercial real estate or multi family investment, and planning to buy more, find out how a 1031 Exchange can help you defer tax and maximize your purchasing power.
Here’s a description of 1031 Exchanges and how you can leverage them for your future success.
What is a 1031 Exchange?
The term “1031 Exchange” refers to Section 1031 of the Internal Revenue Code, which says:
“No gain or loss shall be recognized on the exchange of real property held for productive use in a trade or business or for investment if such real property is exchanged solely for real property of like kind which is to be held either for productive use in a trade or business or for investment.”
Here’s what that means.
A 1031 Exchange allows investors to:
- Defer taxes on the sale of one property
- Roll 100% of the proceeds into the next one
In most cases, the investor must have the property:
- For their business owners, or
- Purely as a commercial or multi family real estate investment
- Property being purchased does not need to match property
Then, the next purchase will need to be a “like kind” property — another investment property or another property for your business.
One can leverage proceeds from their commercial property sale purchase up to three other properties of no more than 200% of the value of the current property.
Does this appeal to you? Read on….
What are the steps for making a 1031 Exchange in St. Louis?
Though there is an optimal order to proceed. These “steps” often happen all at the same time, so you’ll need to have someone (like your Hilliker broker) who can keep things on track, fill in the gaps, and make sure your transaction is moving in the right direction.
STEP 1: Assemble your team.
Before you engage in this intricate process, make sure you have the right people in your corner. Each member of your team should be familiar with the rules governing a 1031 Exchange:
- Attorney
- Accountant
- Lender
- Qualified Intermediary (QI)
- Hilliker Commercial Real Estate Broker
If you’re unsure who will fill any one of these positions, start with your Hilliker broker. We’ll help you assemble a team and get your 1031 exchange off on the right foot.
STEP 2: Sell your current property — but handle the proceeds correctly to set up your 1031 Exchange.
First, you’ll list your property for sale, find the right buyers, negotiate a win-win deal, and close successfully with the help of your Hilliker broker.
Then, however, the money cannot pass through your hands. It must be held by one of the following until you purchase your next property:
- A qualified intermediary (QI), which is often a function of your title company
- A qualified trust
- A qualified escrow account
Once again, your real estate success team will help you through this all-important step.
STEP 3: Put together your next deal!
About the time you close on your current commercial or multi family property, you’ll have to provide a list of potential 1031 Exchange properties in writing. This list is due within forty-five days of selling your current investment and must be presented in writing to your Q1, trust or escrow agent. Because this 45 day window is small, it’s best to your have a list of potential properties early in the process.
You only have 180 days tototal from your first closing date to provide your list (1st 45 days), sign a contract, perform due diligence, and close on your next purchase. Hilliker will help you find what you’re looking for with speed, efficiency, and an eye for detail.
Creative Options for St. Louis Real Estate Investors
Not every deal can line up perfectly and make a 1031 Exchange possible. But the law allows for other tax-deferral opportunities and Hilliker/Westwood agents know how to use them.
What is a Reverse 1031 Exchange?
An investor can buy a new property before selling their current one. In this case they may have the opportunity to engage in a Reverse 1031 Exchange. Some examples:
- You find the perfect property before you’ve sold your existing commercial property but feel confident you can sell your commercial property
- The sale of your current property is delayed, and the property you identified will only be available for a short time
- You expect the market value of your property to increase quickly, so it makes more sense to hold onto it a little longer
The window is still 180 days for a Reverse 1031 Exchange, and you can read how Hilliker helped a company do exactly that here.
What is a 1033 Exchange?
A 1033 Exchange allows investors to defer taxes after an “involuntary conversion,” some top examples:
- Eminent domain
- Destruction by fire, vandalism, or an act of nature
- Property condemnation
Good news a 1033 Exchange investors are allowed more time: up to two years to identify and purchase their 1031 Exchange.
Do I have to remember all of this?
Making a 1031 or other tax deferred Exchange is a complicated process with many rules to follow, pitfalls to avoid, and a strict timeline to meet. It also requires a team of experts and detailed planning. Lawyers, accountants, and other professionals need to work together to make sure your transaction is set up for success.
Your Hilliker/Westwood commercial real estate broker is a vital part of your team. We identify opportunities, make recommendations, then oversee the entire process from beginning to end.
If you’re ready to trade up from your current real estate investment and wonder if a 1031 Exchange is right for you, get in touch with a Hilliker/Westwood broker today.
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