Key professionals you need on your team

In 2021, “46% of Americans surveyed used tax software (like TurboTax) to file their taxes”.¹ That is wonderful in some ways, but you need to be careful. A real estate investor does need key professionals that they can consult with to make sure they are getting all of the advantages in owning investment real estate. Who would be part of that team of professionals?

1. A CPA. When doing 1031 Exchanges and owning investment property, a tax advisor that you can sit with and discuss your current situation and your future plans can be very valuable. They need to understand all facets of the real estate transaction (including 1031 Exchanges) to make sure you get the best tax advantages and deductions as you own these real estate assets.

2. A Qualified Intermediary. The Qualified Intermediary (QI) will coordinate your 1031 Exchange with your closing agent to make sure everything is in order for your sale. They will also coordinate with the closing agent on your purchase. Keep the QI informed on what you want to do and how you want to do it. If you have some ideas that may not work under the code, they will let you know. They can also work with your CPA to come up with the best options for your 1031 Exchange.

3. An Experienced Agent. Talk with your real estate professional to make sure they are well-versed with 1031 Exchanges. They need to make sure that they include a cooperation clause in your purchase and sale agreement when selling and purchasing that you are performing a 1031 Exchange. They also need to understand how credits and repairs can cause a taxable liability for your 1031 Exchange. The agent should also be in regular contact with the QI to make sure nothing is amiss.

4. A Closing Agent. In any transfer of real estate, you need a closing agent (be it an Escrow Officer, Closing Agent, Attorney, etc…) to facilitate the transfer of the property from seller to buyer. When a 1031 Exchange is involved, they need to understand how the flow of funds will work and how additional documentation will be required from the QI. Lastly, some changes to the settlement statement will also be required from the QI. The closing agent needs to understand why these changes are necessary and be able to accommodate those requests.

As a nationwide Qualified Intermediary, Security 1st Exchange is here to guide you through the process of the 1031 Exchange and work with the other professionals on your team to make sure everyone understands how the closing will work.

For more information, please reach out to your tax professional for specific questions or contact the specialists here at Security 1st Exchange for assistance.

References:

¹ Farrington, Robert. “How Much Americans Pay To File Their Taxes”. The College Investor. September 18, 2021.