Ariana Z asked:


I have some money in a 401K and some other investments and I would like to purchase real estate and I heard that this might be a good way.

Jacob

No Responses to “How does a 1031 exchange work?”

1. Brent Robertson on September 1st, 2010 3:51 am

   I’m going from memory here, but if it serves, I think a 1031 exchange simplifies the tax implications inherent with capital gains or losses. You’re actually “switching” properties versus a sale and a purchase. Here’s a pretty cool web site:

2. Stock Trading Warrior on September 1st, 2010 6:37 pm

   Generally, a 1031 exchange is used to move money from one real estate investment into another real estate investment of equal or greater value with no tax consequences.

   What I think you’re referring to is a self-directed IRA account which can hold a variety of assets including real estate. They can be a good idea for using some of your 401K/IRA funds for real estate as long as you understand real estate (long-term investments), real estate values and dealing with tenants if it’s residential. (My husband and I are due to close on one next week). Just make sure you’re not too heavily weighted in real estate vs. other investments as you want to have good balance.

   We are using a company called Entrust to assist with this - check out the link below.