A 1031 exchange enables the seller of a business use or investment property to defer the gain as long as another business use or investment property is acquired.
While the immediate tax avoidance is the top goal of investors, an exchange can help investors accomplish many short and long-term objectives.
- Time value of tax-deferral. Rather than paying the tax now, the investor can put that money into another piece of real estate where their money will continue to appreciate. Essentially, they can build their real estate portfolio with pre-tax dollars!
- Opportunity to acquire new property with greater ROI. Whether is it is more income or greater appreciation, a 1031 exchange helps you move into a better property. A new property has more units, generates higher rents or is closer the beach can be acquired.
- Consolidate several large properties in one larger property or diversify one large property into several smaller ones.
- Relocation of investments. A great way to capitalize on today’s buyer’s market.
- Possibility of converting a replacement property into a personal use property, such as a primary residence or vacation home, at a later date.
- Estate preservation. Currently, all of the deferred gain is forgiven when the Exchanger passes away.
Learn more about how 1031 exchanges work.
