Tools for the Real Estate Investor.
Like so many other serious investors before you, it is entirely possible that you might soon find yourself becoming more and more of a “hands-on” type when it comes to trading in real estate. Such transactions, when done frequently can often become a routine process for many. With experience, the regular investor can quickly become well versed and knowledgeable about many of the various pitfalls and safeguards associated with this type of activity.
While some may elect to hire a real estate agent for the first couple of transactions, the savvy investor might quickly gain sufficient confidence to begin handling his own future trading as a “for sale by owner,” thus saving substantially when it comes to realtor fees. So too, he may be the type to avoid high accountancy fees by preparing his own year-end taxes with one of the many tax software kits available today. Even when it comes to legal documents, many “kit” forms can often be as effective as if prepared by a professional. Should they? The answer to that question rests in the discretion and judgment of the individual investor.
Realtors, accountants and lawyers often warn the “hands-on” types of inherent risks in transactions when they seek to avoid their professional services. So too, like other professionals, Section 1031 Qualified Intermediaries will warn of the dangers associated in “going it alone” in a 1031 like-kind exchange. Instead, these qualified intermediaries will speak of their unique ability to review documents, follow procedures and insure against mistakes. The truth is that there can be significant risks, with or without the use of professionals. Many lawyers, accountants, realtors and professional qualified intermediaries offer exceptional services. No investor should undertake a significant transaction without fully understanding its unique implications and, when necessary, seek professional help.
It is important to keep in mind, however, that even a professional qualified intermediary will strongly recommend that the investor obtain “independent” legal and tax advice. Why? Because they do not offer it. In so doing, the investor is then typically backed-up by liability protection of those other professionals. That coverage, coupled with the added protections afforded through a bank or agent escrow service for funds, allows the “hands-on” investor, utilizing 1031 exchange “tools,” to confidently direct an effective 1031 exchange with significant savings.
Naturally, any investor will want to assure that his “1031 exchange tools” include all of the documentation and services typically afforded by a professional qualified intermediary. These essentials will include an Exchange & Trust Agreement, Exhibits for Identification, Relinquishment, assignment, Notice & Consent, Funds Transfer, Board Resolutions, 1031 Code and Regulations, together with a calendar of time-critical items and detailed checklists for the participants. With the proper “tools” in hand, together with the appropriate tax and legal advice, any forward exchange investor can be adequately equipped to prepare and transact a like-kind exchange.
What’s the difference? Money. Effective and proper handling of a 1031 exchange can be done with the right tools – but for far less than the typical professional qualified intermediary fee. I have witnessed a wide extreme in intermediary fees reaching into the tens of thousands, depending upon the value of the property. If you are a “hands on” type, and costs savings affects your transaction decisions, you do, in fact, have a wide range of choices available to you, through the use of professional “tools” for selling, legal documentation, taxes, and 1031 exchanges.
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