Many people fail to appreciate the value of taking part in a 1031 property exchange when investing in the commercial real estate. With the proper application, you can create an impressive portfolio without paying a cent in taxes.
If you plan to level up your real estate holdings, but the high tax on capital gains are terrible, you might be overlooking something. Raising money for a real estate investment is a tricky undertaking. Hence, there’s a provision in the tax code that aims to help you out.
Under this provision, you can avoid capital taxes if you don’t cash out of the commercial real estate. With the help of a 1031 exchange expert like 1031 Exchange Place, you can grow an empire. By paying the capital gains, you will have a deeper purse as you make your next acquisition.
Get Out of a Risky Investment
Not all property investments prove to be a gem. Market dynamics shift, neighborhoods go down, and newer developments come up. These things can twist the demand and supply. If you’re caught up on the wrong end of these changes, your investments can suffer.
With a 1031 property exchange, you can cash out of bad investment without taking a hit. You’ll trade your loss-making property in one region for another one in a better place without paying taxes.
Diversify Your Holdings
Rental income is a game changer in the commercial real estate. Filling our portfolio with properties with high rental income gives you a real shot at creating an empire. Thanks to a 1031 property exchange, you can diversify your holdings and ensure that you own the most profitable properties.
This means that you can trade a slow-performing duplex for a profitable ranch or an office block for an industrial complex. Since you’re not paying any tax, you get to build equity quickly in each property and grow your income.
With the proper application of a 1031 property exchange, you can harness all its benefits and grow your real estate. By holding on to all of your capital gains, you can acquire grand properties with each deal that you make.