Here is the beginning of an article from quickenloans.com titled, “Real Estate Investors Can Defer Taxes with a 1031 Exchange”. Should you be saving on your taxes every year? Check it out:
Paying taxes on capital gains for property transactions has always been a hindrance to those involved in real estate investment. Why should investors pay taxes on profit from real estate transactions if they’re putting the profit right back into some other real estate transaction?
The answer: They shouldn’t.
That’s exactly why the IRS created 1031 exchanges: to allow for tax deferment on profit that is reinvested immediately. Notice it’s a deferment, not a credit or a reduction. It does have to be paid eventually, just not at the time of sale and not until the money is taken out of the property, at which point it is taxable.
This is the ‘Buyers’ portion of an article from CNN Money with some basic, but useful tips for the modern day real estate investor.
Avoid the big guys. Shoppers looking for a property priced at $200,000 or less will most likely be competing with investors. One way to go around them is by searching Fannie Mae foreclosures at homepath.com. Non-investor buyers have dibs on these listings for the first 20 days.
New Construction
New construction is another good bet. Investors are after deals, and builders won’t negotiate. To find developments, narrow your search on sites like Realtor.com and Trulia to “new home communities.”
Get the right help. A creative, aggressive agent can also help you find the right home before cash-toting investors swoop in. Ask candidates to walk you through their tight-market tactics. Find out whether they offer services like direct-mail solicitation (entreaties to sell that are sent to homes in your preferred neighborhoods), says Denver real estate agent Ron Buss. Also ask whether he has any current “pocket listings,” for-sale homes that haven’t been entered into the MLS.
Is it a Flip?
Ask if it’s a flip. Some investors look for cheap out-of-shape homes, do a quick fix, and throw them back on the market. While that’s not necessarily a bad thing, it’s worth finding out whether a home has been flipped so that you can vet the renovations carefully. Any house sold in the past six months qualifies (check the property records on your local appraiser’s website). To guard against poor-quality work, ask for a list of all recent repairs and flag them for your inspector, says Brandon Turner, editor of investing website BiggerPockets.com.
Be prepared. When you need a loan and competition is all-cash, you’ll need to top the liquid offer by at least 5%, says Zillow blogger Brendon DeSimone.
As in the growth markets, you should also prove to sellers that you’re ready to act by going through underwriting before you shop. Finally, get personal: Write the seller about your plans to live in and care for the house. If you’re lucky, the owner may prefer to sell to a person rather than to a company.