Flipping Real Estate and Section 1031 Exchanges

This information reprinted with permission from Strategic Property Exchanges, LLC, the 1031 property exchange experts.

Flipping has become a “hot” approach recently due to the extremely rapid price appreciation for real estate in some areas of the country, particularly the South and Southwest. These types of transactions are not generally eligible for Section 1031 exchange due to the fact that many times the investor has no intention to hold the property for investment, but rather is looking to sell immediately. There are other excellent methods to reduce or defer taxes in the case of flipping. There are two styles of flipping. When market conditions are right, rapid buying and selling of properties can be profitable. However, this type of flipping is really pure speculation, which is gambling, not investing, and is dependent on what economists call the “greater fool” theory, which only works in “bubble” markets, and then only for a short time. Flipping as an investment, however, has different characteristics. What this type of investing really involves is finding properties which can be purchased inexpensively, and then once the property is secured, quickly placing these properties with purchasers... [ Read the full article ]

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