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Why 1031 reverse exchange

This particular exchange is getting to be more and more popular all of the time and there is a good reason for this. While this may be one of the more complicated forms of the
1031 it is also one of the most flexible ones. You will have much more control over the way that you structure the entire exchange.

Your property will not have to be already owned with the reverse 1031. And you will also be able to control the new property even before the first has been sold, this in itself is one of the most popular aspects of the reverse 1031. This is great because you will be able to secure your new property before you get rid of the old one which protects you from loss.

There are several different reverse exchanges that you will be able to choose from and all you need to do is find the one that is right for your particular situation.

Traditional Reverse
This is not a safe harbor reverse because of the fact that it cannot stand in the timeframes like a safe harbor. This reverse exchange is riskier and more likely to be flagged by the IRS that is why it is so imperative that everything be done correctly.

Safe harbor reverse
In this option the accommodator will be taking control of the new replacement property before their old property has been sold to another buyer. If you are exchanging properties you will have to identify the properties within the first 45 days and all other detail must be taken care of in the next 180. If you structure this properly you will be considered to be in a safe harbor b y the IRS. This is a harder to meet option but it is by far the safest.

Construction/Improvement Reverse
It is with this option that you will be able to take control or park a piece of property that is to be improved. This is great for those who want to do something with their property as they will be able to fix it up during the exchange period. This way you will have the power to actually design your exchange property. This is a more complicated exchange option and there will be much more red tape and documentation involved with it. There is significant risk involved with this sort of reverse exchange.

Leasehold Improvement Reverse
This is not considered to be a valid structure by everyone including the IRS. In this case you will actually add to or fix up the property that you currently own, it is this property that will be considered the parked one. This option is gaining in popularity but it is very complicated and there will be large amounts of papers to go through and sign.

Reverse exchange 1031 can be a very useful tool to your investing but you have to learn what is what. These are complicated exchanges so ask an expert to help guide you through things in order to avoid any trouble with the IRS.