WEALTH BUIILDING 1031 exchange benefits

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1031 Exchange Residential Properties - Decrease Capital Gains Tax

Increase Basis for Fully Depreciated Assets

Investors holding onto investment property for extended time periods run out of depreciation expense when the asset matures to its full useful life for tax purposes. Using a 1031 exchange, the investor can restore basis and restart the life of a depreciable asset.

1031 Exchanges Reinvestment in Like-Kind Replacement Properties for 1031 Exchanges

Defer Capital Gains Taxes on The Sale

The main reason real estate investors do a 1031 exchange is to not pay tax on the sale, and use that cash as equity in the new property, a wealth building technique. In this manner, the tax is “deferred” until sometime in the future when the new property is sold down the road.

Increase Cash Flow

Many investors are holding appreciated land or other non-income producing real estate and are looking to exchange it for income producing residential or commercial property. This increases cash flow and enables them to live a better lifestyle especially as they head into retirement years.

Greater Leverage Capability to Diversify Your Portfolio

Every smart investor knows NOT to keep all of your eggs in one basket. One of the most common 1031 benefits involves capitalizing on highly appreciated property. Specifically, you can leverage the property equity by doing a 1031 exchange into two or more properties. This creates a diversified real estate investment portfolio used to hedge against losses in value of other investments due to location or economic downturns.

Exchange to Convert to a Primary Residence

One of the most popular 1031 exchange benefits are the tax-free conversion strategies available to American Homeowners. First, 1031 exchange your old investment property for a new one. Then rent out the new one for two years as required. After two years, you move into the new property then convert it to a primary residence, live there for three more years, then sell it.

Eliminate Day to Day Management Headaches

If you have accumulated many rental properties, you know what a pain it is to manage them all. The good thing is they have appreciated in value, and now may be time to sell. Therefore, you can exchange those properties into one property by consolidating. As a result, you rid yourself of those nasty tenant phone calls and free up your time. Above all, you defer paying capital gains tax on the sale of your old investment properties.

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