More About 1031 Investment Properties: What Investors And Property Scouts Should Know

Hello fellow investors, commercial property scouts and those that want to become investors and commercial property scouts.

In a previous article of mine on hubpages, you have gotten a lot of information about 1031 exchanges. This one will cover choosing a 1031 investment property. It is not any different from purchasing a property for investment. A 1031 exchange is a tool from the Internal Revenue Code which allows you to sell a property, which has equity, and defer the taxes on capital gains.

Again, I stress the importance of making sure you can close on the 1031 investment property of your choice. As I have stated before, if you do not close in time, you will have to deal with the tax consequences, i.e.: Capital Gains, whether long term or short term.

So, as you search for your new 1031 investment property, make certain that you can easily afford the property. Use common sense. If the market is weak make sure you have cushion in the deal so you can qualify and close with little or no problems. If the market is declining, be extra cautious and drive a hard bargain. You do not want to be the next investor losing their shirt. In an upturning market place do not go beyond your financial reach thinking that you will be able to stretch your dollar and ride to the top of the wave. You have to be able to afford the deal or have enough reserve to survive the purchase, rent up, clean up and remodel to reach a break even or positive cash flow.

Click here to learn more about 1031 investment properties and commercial property scouting

By definition, a 1031 Exchange is:

With regard to the type of 1031 investment property you choose, choose the building type you like. For example, if you like apartments, then look only at apartments. You have to decide whether you are going to be a hands-on investor in order to improve the property, turn the property around and increase the net operating income. Or you can choose whether you are going to manage the improvement process, property turn around and increase the net operating income.

If office buildings are your preferred 1031 investment property, you have more homework to do in order to determine if it is the right building for you. For example: Is it a one tenant building? What are the terms of the lease? It is a triple net lease? When is the lease up for renewal? Are lease increases built into the lease? If it is a one tenant building and they move out how long would it take to find and place a new tenant? These are things to think about and include in your long-term plan for the building.

Industrial and warehouse space is an animal unto itself. A lot of the decision comes down to rentable/useable floor or lot space. Can you buy it at low enough price to make a profit? Who would be your customer? What is the demand for the building you are looking at purchasing? Office space in an industrial building or complex revolves around the need and the ease with which it can be modified or not. Every square foot of office space eats into your rentable storage space or shop floor space.

So as you are scouting and helping fellow investors, always be on the look out for an opportunity to buy up to a new 1031 investment property. As an investor, you will always want to be on the look out for this type of property when thinking about selling some of your existing assets in order to defer capital gains.

Click here to learn more about 1031 investment properties and commercial property scouting

As a property scout, you may be asked to find a property that is a suitable 1031 investment property if any of your investors are looking to roll their capital gains into a different property.

The more you know, the more successful your business will be!