Grow Your Investment Income With a 1031 Exchange

Are you ready to increase your income from your investment properties? Have you been thinking it’s time to readjust your portfolio? Then a 1031 Exchange might be just what you need. If you’re ready to make some changes in your real estate investments without paying capital gains taxes, then it’s time to look into a 1031 Exchange. Here’s what you need to know.

What is a 1031 Exchange?

If you’re a property owner, then you can defer your capital gains tax on the sale of that property by purchasing a replacement property with the proceeds. A 1031 Exchange allows you to defer those taxes by using 100 percent of your untaxed proceeds from the sale to buy a new property. If you’re an investor who thinks it would be financially beneficial to sell your property, defer your capital gains tax, and buy a new, more lucrative property, then a 1031 Exchange can be your ace in the hole.

How does a 1031 Exchange work?

When you enter into a 1031 Exchange, you must sell your current property. Be advised that you can’t take constructive receipt of those proceeds in order to qualify. They must be held by a Qualified Intermediary until it’s time to purchase a new property. You must identify your new property within 45 days, and the 1031 Exchange generally gives you up to 180 days to close on the replacement property. The entirety of your proceeds from your initial sale must be reinvested in the new property.

What are the advantages of a 1031 Exchange?

The most obvious advantage of a 1031 Exchange is that you will defer paying a capital gains tax on the sale of your current property. Savvy investors can use this strategy when they’ve located new properties of equal or greater value than their current property that will produce more income. The 1031 Exchange then gives you more funds to put towards that new investment by deferring the capital gains tax.

When Should I enter into a 1031 Exchange?

Do you want to expand your investment portfolio into new markets? Then a 1031 Exchange is just the tool you need. But they can also be useful if you’ve made a poor investment that would cause you to lose money in a sale because of the capital gains tax. By deferring the capital gains tax, you have more money to invest in a new property that has more potential.

Can I choose a reverse exchange instead?

While reverse exchanges are not as common as forward exchanges, they can still be done in order to increase your financial opportunities. A reverse exchange happens when you’ve already purchased a replacement property before you sell your current property. The reverse exchange may allow you to keep your current property until the market improves so that you can maximize your return on investment. There is typically a holding period of 180 days for reverse exchanges.

Contact Agent inc. today!

Would you like to speak to a professional about whether or not a 1031 Exchange is right for you? Then contact the experts at Agent Exchange or Agent inc. at 949-791-8160 or [email protected] to get started. Let’s open your world to new possibilities!