Taking part in a 1031 property exchange has many benefits, some of which are not readily identifiable. With a little effort, you can use tap into these benefits and grow your real estate empire to suit your needs.
You need a sound investment strategy to thrive in the real estate sector. Gleaning from qualified intermediaries such as 1031 Exchange Place, you need to seize every available advantage to grow your income and lower your exposure to risk. Luckily, the government makes this easy for investors through Section 1031 of the Tax Code, which lets you defer tax on capital gains. With proper application, you can use this facility to grow your empire.
Move to a Different Location
If your retirement plans entail moving to a different region with a better climate or to be closer to your family, you shouldn’t have to leave your investment behind. With a 1031 property exchange, you can achieve this goal without your investment portfolio taking a hit. You can sell off your current holdings and use the money to buy a property of equal or higher value in your desired location.
Deferring capital gains taxes means that you can go after a more valuable property, which translates into greater rental income. Taking part in a property exchange means that you get to move your investment and strengthen your finances at the same time. It lets you enjoy your retirement without worrying about your financial security.
Grow Your Rental Income
The commercial real estate sector covers many rental properties, each with a varying level of challenges and opportunities. It includes residential apartments, office blocks, agricultural land, warehouses, and more. Market forces often influence the level of demand in each of these areas and have a direct effect on the rental income. Naturally, the property with high demand will have better returns. With a 1031 exchange, you can switch from one commercial estate to a more lucrative one. For instance, you can swap a small block of apartments for an office block or a warehouse if they have higher returns than the former. Still, you can trade up from a small block of flats to a medium-sized one with a more significant rental income. You can opt to spread your holdings to diversify your income and lower your risk.
Have Lower Involvement
Dealing with tenants can prove to be a tedious undertaking as you might have to endure midnight phone calls about blocking toilets. You’ll also have to deal with troublesome tenants if you don’t outsource the management to an agency. If you’re keen to move away from all these hassles, taking part in a 1031 exchange can help.
You can parlay your current holdings for a tenants-in-common arrangement in a more substantial property. Instead of buying a replacement property, you can use the proceeds from the sale to buy a stake in a property, such as a large mall, hotel, or hospital. That means that you co-own the property with other people who’ve bought a stake in it as well. You’ll have no active role in its management, but you’re are assured of a check in the mail.
Taking part in a 1031 property exchange can help you tailor your investment portfolio to suits your specific needs. You can relocate your property to a more lucrative market or trade it for more valuable properties to secure your finances. It’s a proven way to diversify your property holdings and lower your risks.