What is a 1031 exchange and how does a 1031 exchange work?

That's what we're going to cover in great detail on today's video.

Now, in a recent video on tax savings for real estate investors, I briefly touched on the powerful benefits of a 1031 exchange.

So today we're going to dive deep into what a 1031 exchange is and how it works

and how you can find out if this strategy is a good fit for you. So grab a piece of paper and a pen.

Now if you're thinking about selling off one of your rental properties,

you should be aware that doing so can leave you with a massive tax bill.

People don't think about this,

thanks to the capital gains laws under our tax code. If you sell an

asset for more than you purchased it, the government collects a tax on that

gain which can be upwards of thousands of dollars.

But with a 1031 exchange, you can buy a new property

and defer those taxes entirely.

So here's how it works.

To do a 1031 exchange, you'll need to work with a qualified intermediary who can walk

you through this process. In order to qualify for a 1031 exchange, the properties involved in the

exchange must be held for either business or investment

purposes because I know someone's going to ask and before you do, no, you cannot conduct a 1031 exchange

in your primary residence, the place where you live.

The IRS will request that you prove that your property is an investment via tax returns

and records of rental income, so you cannot do that. And your new

new purchase must meet some requirements as well. This means if you want to

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