When you think of Illinois real estate investing, what’s the first word that comes to mind?
Taxes. Yep, us too.
With the wealth of properties in the rural areas and the high value of the Chicago metro area, there are endless opportunities for real estate investing all over the state. This means there are a lot of places where you can invest and make a profit, no matter what kind of properties you want to work with.
If you want to make money in the real estate market, it is important that you diversify your portfolio and can react to the fluidity of the industry. Unfortunately, when you do that, you often have to pay taxes in the form of federal and capital gains tax. These can eat up your profits quickly and can be a major source of income depreciation if not properly managed. This is why so many investors have been utilizing 1031 exchanges instead of cashing out entirely to make the most of their investments.
In this article, we will cover some of the basics of 1031 exchanges and, hopefully, answer some of the questions you might have about the laws and regulations involved in a 1031 exchange in Illinois. We will also cover some of the things that are specific to the state and help you make sure that your 1031 exchange in Illinois is in compliance and legal from the get go. This will help ensure that you won’t run into any problems down the road.
1031 Exchange in Illinois Rules Basics
The basics of the 1031 exchange in Illinois are not difficult to understand, but it is important that you have a complete grasp on them. IRC code section 1031 is a clause that allows investors such as yourself to defer capital gains tax payments for many years. In general, this means that instead of selling an investment property and cashing it out when you want to diversify, you can simply exchange it for what the code calls a “like-kind” property.
Some people think that the new property in a 1031 exchange must be similar to the one you are exchanging it for. That is not the case! It usually is simply referring to a “new” property and doesn’t necessarily mean that it needs to be used for the exact same purpose. For example, a duplex can be exchanged for a retail or industrial property. Or a self-storage facility can be exchanged for a marina. It just has to be real estate.
Some 1031 exchanges can be done straight up, meaning that you can simply exchange one property for the next without any money changing hands. However, you can also sell the property and purchase another like-kind property as long as you close on the purchase within 180 days. By far, this is the most common type of 1031 exchange in Illinois. With this type of exchange, you have more time to work out the deal and close it.
1031 Exchange Rules Specific to Illinois
While many states have specific rules pertaining to 1031 exchanges, Illinois is fairly liberal with theirs. There are not nearly as many laws in the state of Illinois as there in, say, California or Washington. Because of this, a 1031 exchange in Illinois could be a great option if you are trying to invest in different properties without getting bogged down by capital gains taxes and other fees involved with purchasing a property in cash.
Although there are not many rules specific to the state of Illinois, you will have to work through an intermediary to put the funds in escrow in order for the exchange to be legitimate. This ensures that you do not actually have to touch any of the money that is changing hands and are therefore do not have “constructive receipt” which would invalidate your 1031 exchange. This is one of the main reasons why a 1031 exchange in Illinois is such a convenient money saver.
By working with the intermediary, you will have to inform them as soon as the deal on the relinquished property is closed. Then you must identify new potential properties to exchange within 45 days after the closing. Since the 180 day exchange period runs concurrently with this 45 day grace period, the intermediary will then have 135 days to make the transaction. This is why it is so important to work with a reputable 1031 exchange company. Luckily, we have put together a list of some intermediaries that work in 1031 exchange in Illinois. They have been researched and vetted and you can be sure that they will handle the transaction in a timely and professional manner.
Why Do a 1031 Exchange in Illinois?
There are a number of reasons to do a 1031 exchange in Illinois. If, for example, you are interested in moving the facilities for your business and do not want to lose money by paying the capital gains tax, a 1031 exchange could be your best option by far. As long as you are purchasing a property that is considered “like kind,” you can facilitate this purchase through the 1031 exchange. The most common use of the 1031 exchange in Illinois is for real estate investors. If you’ve owned a rental property for a long time, using the 1031 exchange to buy a new property is a tax-efficient way of selling and reinvesting.
One of the things you can not purchase with a 1031 exchange in Illinois is a private residence. These properties will not be considered for this type of transaction and you must pay property taxes and capital gains taxes on these purchases. However, depending on how it is categorized, you could exchange two different vacation homes or second residences as long as they are considered “like kind” and only used up to 14 days each year.
One of the things that is important to remember is that “like kind” does not necessarily mean that the two properties that are being exchanged are in the same condition. The law is fairly vague when it comes to the condition and character of the property in question. This means that even if there is a stark contrast between the quality of the two properties, they will still be eligible for a 1031 exchange in Illinois. The law is mostly concerned with how the properties will be used and what their purpose is. In this regard, the law is incredibly narrow and stringent. It is very important that the two properties will be used for the same purposes.
Best 1031 Exchange Companies in Illinois
In order to help you figure out the best intermediary company for your 1031 exchange in Illinois, we have put together a list of some of the best companies that specialize in them. With this list, you can make the right decision regarding which company will hold the money in escrow and make sure that the exchange goes smoothly and legally.
One of the reasons why you are going to want to work with a reputable exchange company is that there are time limits on when the transaction needs to be completed. Because of this, working with a company that has experience in these types of exchanges is incredibly important. You don’t want the transaction to get slowed down unnecessarily and miss out on the deadline of 180 days.
This is why we have put together this comprehensive list of the best 1031 exchange companies in Illinois. We have researched and vetted them to make sure that they are timely and stable. Financial stability is an incredibly important factor in choosing one of these companies. Should one of them go into insolvency while holding your funds, you could lose the money that you have in escrow. By choosing one of the companies from our list, you can be sure that this will not be an issue and that your transaction will be completed on time so you can enjoy the benefits of a 1031 exchange in Illinois.
First American Title
First American Title is a national company that has offices all over the country and deals with all different types of exchanges and transactions. Because of this, they are a great choice for your 1031 exchange in Illinois. Having been in business since 1889, they have seen all kinds of people and clients over their massive history in the United States. This kind of stability is key for 1031 exchanges and is something to look for when picking an intermediary to oversee it.
First American Title is a full service qualified intermediary. This means that they can handle all aspects of the transaction and give you the kind of attention that you need in order to meet all the deadlines. You will not be stuck dealing with any unforeseen problems or bumps in the road since they have so much experience. They are a member of the Federation of Exchange Accommodators and are completely certified with all governing bodies to do this kind of transaction.
1031 Exchange in Illinois Services First American Title Offers
Because they are fully certified in all types of 1031 exchanges, they can help you with almost anything you need. This is incredibly important since all exchanges have different requirements that are going to be specific to the individual. Having a company on your side that can handle anything that comes up is the key to a profitable transaction. Here are just some of the services that First American Title can offer for your 1031 exchange in Illinois:
- Tax-deferred exchanges of real and personal property
- Reverse exchanges
- Build-to-suit transactions
First American Title Experience and Financial Stability
You would be hard pressed to find another company that has so much experience with 1031 exchanges. Since they have been in business for nearly 150 years, they have worked with all kinds of clients to give them a profitable and easy transaction for their property exchanges and transactions.
This kind of longevity is incredibly important to look out for when researching companies to facilitate your 1031 exchange in Illinois. It not only means that they are stable enough in their transaction funding, but also that they have the ability to make the exchange quickly and on time.
They are staffed by qualified attorneys and Certified Exchange Specialists who have been working with clients like you for years. Because they know how to get these types of transactions done, you can rest easy knowing that you are in good hands and are working with people who want to help you safely and legally diversify your investment portfolio.
First American Title Locations and Customer Service
Because First American Title is a national company, they have offices all over the state of Illinois. Because they are backed by such a long history and legacy of customer service, they are incredibly motivated to hold on to customers and keep their clients as happy as they can be. We recommend using them for any of your needs regarding a 1031 exchange in Illinois. Their offices are located at:
- Chicago – 4230 W Irving Park Rd, Chicago, IL 60641
- Joliet – 167 N Ottawa St Suite 102, Joliet, IL 60432
- Warrenville – 27775 Diehl Rd, Warrenville, IL 60555
IPX 1031 is a large national company that maintains offices in the Illinois area and has a wide range of experience in the 1031 exchange field. They specialize specifically in these types of transactions. Not all companies that offer these services only work exclusively in 1031 exchanges, so this is a fantastic feature of their business plan and philosophy. Because they only work with this kind of transaction, they have the experience that is needed to get you the kind of deals you need.
Since the 1980’s IPX 1031 has been helping people with 1031 exchanges and making sure that everything is in compliance. Their qualified intermediaries are invested in your transaction’s success, which is one of the most important things you need to look for in a 1031 exchange company. Their parent company, Fidelity National Financial, is one of the largest financial institutions in the United States and they work hard to maintain that reputation.
1031 Exchange in Illinois Services IPX 1031 Offers
Because they have such a specialized array of experience, they know exactly what to do to help you get the most out of your 1031 exchange in Illinois. This kind of specialization results in the focus that is necessary to make the right choices and get everything squared away within the required time frame. Although they don’t offer as many services as other exchange companies, in this case, that is a major plus. Here are some of the services that IPX 1031 offers:
- Delayed Exchanges
- Reverse and Improvement Exchanges
IPX 1031 Experience and Financial Stability
IPX 1031 is an extremely stable and experienced company. Because they are backed by Fidelity National Financial, they have a robust insurance policy for your transactions. This means that they can back all of the money that they have in escrow while waiting for transactions to close. Because of this, you can rest easy leaving your money in their care.
They have a 30 million dollar errors and omissions insurance policy for all of their transactions. This means that if there is any sort of mistake on your 1031 exchange in Illinois, they will take care of any of the fees you may incur. This makes them a great choice if you are nervous about the idea of your exchange and are hesitant to leave the translation in someone else’s hands.
They also have a 100 million dollar fidelity bond. In the event that something happens and the company becomes insolvent while they are handling your transaction, they keep this bond available to ensure that you are not liable for any of the lost funds.
IPX 1031 Locations and Customer Service
The customer service at IPX 1031 is unparalleled. Because they are so specialized, they know everything about dealing with any of your questions and can answer them truthfully and clearly. This is incredibly important when working with a company that is handling such a large amount of money. They have an office located at:
- Chicago – 10 S LaSalle St Suite 3100, Chicago, IL 60603
Chicago Deferred Exchange Company
Chicago Deferred Exchange Company was formed in 1989 and has been helping people like you make their 1031 exchange in Illinois as easy as possible. They are another example of a company that has focused their business to only deal with these kinds of transactions. They are one of the oldest Qualified Intermediaries in the business and they take that position very seriously.
They only deal with like kind exchanges and have focused their company in order to serve their clients as well as they possibly can. Because of this, they are a great choice for people who want to work with an exchange company that has their best interest at heart and is backed by years of experience.
They set up a Qualified Trust account for all of their clients in order to hold their money in escrow and make sure that it is as secure as possible while the transaction is being processed. This makes them a good choice for those who might be nervous about holding their assets with an intermediary. Also, any interest that accrues in the trust over the course of the transaction goes to you as the seller.
1031 Exchange in Illinois Services Chicago Deferred Exchange Company Offers
Chicago Deferred Exchange Company offers a specific set of services that are meant to benefit you through their expertise. The core team at the company has been working together for over 15 years and they are considered experts in the field. Because of this, you can be secure in the knowledge that your real estate transactions are being handled by people who specialize in the kind of 1031 exchange in Illinois that you want to facilitate. Some of the services they offer are:
- Forward exchanges
- Reverse exchanges
Chicago Deferred Exchange Company Experience and Financial Stability
Because they put your funds into a Qualified Trust, those funds can not be accessed by any creditors. This is a feature that is incredibly comforting to anyone who might be a little nervous about the whole process. Anything that Chicago Deferred Exchange Company might be liable for will not affect your money that is in escrow or your 1031 exchange in Illinois.
The experience they bring to the table is one of their best assets. Because this core group of people has been in business together for so long, they know how to communicate with each other as well as the institutions that they are handling the transaction for.
Chicago Deferred Exchange Company Locations and Customer Service
The customer service at Chicago Deferred Exchange Company is one of their main assets. They treat each transaction as if it were their own and they want to make sure that you keep coming back for all of your deferred exchanges. Because of this, they have spent their careers gaining expertise on the ins and outs of 1031 exchange in Illinois. Their office is located at:
- Chicago – 231 S LaSalle St, Chicago, IL 60604
Chicagoland 1031 Exchange
Nathan Kuhn, the president of Chicagoland 1031 Exchange has been in the business for years. He has worked exclusively as a 1031 exchange professional and knows how to best navigate the sometimes complicated world of Chicago real estate. In his time in the business, he has completed over 200 of these transactions so he understands how to best go about them and how to make the most of them.
One of the main things that Chicagoland 1031 Exchange offers is a commitment to helping clients understand the ins and outs of a 1031 exchange in Illinois. This is imperative for anyone who might be entering into this kind of transaction for the first time and wants to have the best possible understanding of the process.
1031 Exchange in Illinois Services Chicagoland 1031 Exchange Offers
Chicagoland 1031 Exchange is dedicated to a specific, basic type of transaction. Nathan has narrowed his focus down to helping individuals who are interested in exchanging properties as investments and business facilities. If you are looking to do this kind of exchange for the first time, he could be a great choice since he is dedicated to customer service and making the whole process as easy as possible. As of right now, Chicagoland 1031 Exchange offers services in:
- Forward exchanges
- Reverse exchanges
Chicagoland 1031 Exchange Experience and Financial Stability
One of the things that Chicagoland 1031 Exchange is dedicated to is property due diligence. They want to ensure that all the properties involved in the exchange are up to code and as risk free as possible. This is an important feature and one that is often overlooked by some of the larger companies that offer 1031 exchange in Illinois.
Chicagoland 1031 Exchange Locations and Customer Service
Because Chicagoland 1031 Exchange is a smaller company, they can work with you much more closely than some of the other larger companies. If this kind of customer service experience is important to you, they could be your best option. They work exclusively with people who are perhaps doing this kind of transaction for the first time and they try to make it as painless as possible. The customer service regarding their property due diligence is second to none and can be one of the most important aspects of a 1031 exchange in Illinois. Their office is located at:
- Arlington Heights – 120 W Eastman St Suite 300, Arlington Heights, IL 60004