When to do a REVERSE exchange...

NOW may be a perfect time to do a reverse exchange...

When the real estate market is a buyer's market, it may be a great time to buy but a lousy time to sell. One of the challenges in a buyer's market is also trying to do a 1031 exchange -- because you have to both sell and buy to accomplish a like-kind exchange -- otherwise you have to pay the capital gains tax. So the very nature of a buyer's market tends to cancel out the positive effects of an exchange.

But not so fast.... There's a type of exchange called a reverse exchange that can be very useful in a buyer's market.

In a reverse exchange, you get to do the exchange backwards: you buy your New Property first -- before you sell your Old Property (as opposed to a regular straight-forward exchange where you sell first, and then buy).

With a reverse exchange, you can buy the property you've dreamed about while at a great price, and then sell your old property LATER -- when its price has improved. If done properly, the reverse 1031 exchange will take care of all the capital gains tax issues for you.

But setting up and structuring a reverse 1031 exchange is far more complicated than a straight-forward 1031 exchange. It's important that you consult with a good QI to set up the reverse exchange process BEFORE you start scooping up all the great deals to be had in a buyer's market.

Choose a QI that knows all the legal, accounting, and the real estate aspects of the marketplace.

--The Experts