Contracts for Deed, also known as Land Contracts, can add some complications to a 1031 exchange. Part of that?s because the terms are used differently in different areas. Some areas could have totally different structures in place for these contracts that may make using this sort of 1031 investment property a bit tricky.
Outlining a Contract for Deed is the first step in understanding how it operates. It may also be called a Contract for Sale in some areas, as well as a Land Contract. The name itself isn?t that vital, but how the contract is worded matters. An expert should look over the documents to be certain a clear appreciation of the contract is established before you take any steps.
A situation that will occur when using a Contract for Deed property in a 1031 exchange will entirely depend on the contract, which is why it must be read fastidiously. A 1031 exchange involves a property you sell to a customer and a property you buy from a seller. If you are going to buy Contract for Deed and the document does not transfer full possession rights to you upon closing, it?s doubtful that property can qualify as a replacement property.
Most Contracts for Deed do transfer ownership right away, even though payments are made over time. This is necessary for a successful exchange. However, some Contracts for Deed have the rights completely transferred only on payment in full. Making sure this is not the case is required.
When a Contract for Deed transfers rights to you right away, then the property will probably qualify as replacement property because the transfer of ownership of the property is clear. It could be disqualified for other reasons that don?t have anything to do with the Land Contract, but the contract itself should not hinder the exchange.
Contract for Deed 1031 investments, triple-net lease property and other investment structures require professionals who know the way to handle your portfolio. Get more info about these things and more at 1031investmentopportunity.com today.
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