The reason why investors go forward with 1031 tax delayed exchanges is that it lets them hold off on paying property taxes when purchasing real estate. If you're going to use these exchanges yourself with rental properties, be sure to take these steps to protect yourself.

Sort Out the Necessary Timelines

One thing you want to remember when using 1031 tax delayed exchanges for rental property transactions is there is finite time to do things. For instance, you have to find a replacement property after selling a rental property by a certain time. Otherwise, you'll be expected to pay for property taxes immediately after the sale. 

You just need to keep these timelines straight and see when they are according to the state that you're engaging in these real estate transactions. That will keep your transaction practices properly aligned.

Prepare for These Exchanges Before Using Them

A smart tactic you can implement when dealing with 1031 tax delayed exchanges is planning for them well before you start this process. Then regardless of what timelines you have to honor according to IRS protocols, you'll be able to do everything more efficiently and thus safeguard yourself from stressful obstacles.

For instance, before you even sell a rental property, it's a good idea to line up a replacement property that is the same or more in value. Then it will be easier to start the negotiating process shortly after selling a rental property, ensuring you don't miss important deadlines.

Get a Reference for the Account Intermediary

You may not always be able to find the right types of rental properties quickly after selling one and using 1031 tax delayed exchanges to your benefit. In this case, the funds you receive from the sale of this property will go into an account that will be managed by an intermediary.

It's a good idea to get a reference for this professional so that you can feel good about the security of your money as well as your ability to comply with 1031 tax exchange legal requirements. For instance, if you use a broker to facilitate rental property transactions, they may be able to recommend the perfect neutral party for this role. 

If you often sell rental properties to make a profit, 1031 tax delayed exchanges might be beneficial because it saves you from having to worry about property taxes initially. Just make sure you know everything about these exchanges before getting started. 

For more information on rental property 1031 tax delayed exchanges, contact a professional near you.