There are many reasons to do a 1031
An exchange is a very simple concept.
As a real estate investment property owner, you are exchanging your current (relinquished) property for replacement property and reinvesting all the proceeds.
Think of an exchange as trading in your relinquished property value and getting replacement property at the same value or higher to defer paying the taxes normally owed when you give up property that has gained equity.
The tax law lets you defer paying the taxes when you give up your relinquished property
as long as you replace your investment with more real estate. This permits you to keep growing the investment of your capital by moving to better investments without sacrificing some of your funds to taxes.
Change to Cash Flow Property
Investors who own raw land rarely have cash flow property.
A “like-kind” exchange is real property for replacement real property.
If you give up investment land, you can buy a rental property to generate rental income. You are not stuck with non-cash flow type property.
Change property types and locations
If you currently have property that isn’t performing well, you can exchange that property for a different
property type and/or location.
For example: You can exchange a poorly performing rental townhouse and replace it with a 7-Eleven or a single-family rental home in a great neighborhood.
An exchange gives you the opportunity to trade/exchange into property that is potentially a great new opportunity.
Trade from a small condo in a neighborhood saturated with competing rental condos into a small commercial office building next to a new hospital that has a great opportunity for growth.
Exchange out of an area of town that is declining into a newly developing area.
Many of our clients are planning their estates and want to make sure they leave their heirs properties that can be easily dealt with.
Leaving behind a warehouse to multiple heirs might potentially cause family friction.
Exchanging from a single property into multiple replacement investments to later leave each heir an individual property might be a more amicable solution.
An older property with potential maintenance issues can be exchanged for newer property with fewer potential headaches.
A small rental condo can be exchanged for a triple-net rental, like a Dollar General store or a Burger King which might be easier to manage and provide a better investment return.
1031 Exchanges shouldn’t be scary.
Since 1990 we have been helping real estate investors with 1031 Exchanges.
We’d love to teach you how 1031 Exchanges work, what to avoid, and how we can help!
Since our founding in 1990, Realty Exchange Corporation’s sole mission is to provide qualified intermediary service to real property investors and their advisors for 1031 exchanges.
William Horan is a Certified Exchange Specialist® (CES), the qualified intermediary industry’s prestigious designation. The CES® designation requires years of experience, testing, adherence to a code of ethics and on-going continuing education.