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If you are looking for a huge amount in tax deductions, you might want to consider exchanging your investment property. To find out more about this and the meaning of the same-kind property keep on reading this articles. Be sure to read through this article to find out more.

1. Exchange of an Investment Property

One rule is that both properties must be of the same kind. Personal properties of a similar class are like-kind properties. Of course, personal and commercial properties are not like-kind properties. Also, personal property used predominantly in one country and personal property used predominantly in another country are not like-kind properties.

Exchanges are made for people wanting to stay invested in real estate, increase their leverage and to avoid paying high taxes upon the sale of property. Why do people prefer the exchange of an investment property? Well, there are several reasons: To restore depreciation by exchanging one property for another of greater value.

The exchange of an investment property can be used to combine the equity of several properties into one large investment. In some of the cases, investors choose exchange properties just to change the investment location (and this could be made for other several reasons, such as appreciation possibilities).

These are the different types of properties that can be involved in exchange investments: rental houses, apartments, commercial properties, raw land, office buildings, retail properties, ranches and industrial properties.

2. A Successful Tax Deferred Exchange

Here are the things that must be done to gain some tax money from an exchange of an investment property. First, to make sure your investments are compatible for this type of action, ask for professional advice from a financial advisor. After that, and after you list the relinquish properties, you can enter in contact with the buyer for the exchange or sale of the property you wish to relinquish.

Once you do that, open an escrow for the relinquished property and coordinate with the facilitator. All the exchange papers must be signed by all parties or the transaction will be considered invalid.

The rest of the steps are really not that difficult and will likely be taken care of for you by your broker. The rest of the process is straightforward and involves a lot of paperwork, but the benefits are worth seeing it through. Whether you want a more valuable property, or just want to have a property in another place, just remember that these can be done with no taxes involved. Many people dont know about this and are missing out on tens of thousands of dollars each time they move.