Make the Most of a 1031 Property Exchange With 2 Nifty Moves

Man shaking hands with womanA vibrant real estate sector in the United States promises great returns to the discerning investor. However, a high capital requirement often stands in the way of many would-be investors.

Ordinarily, you need deep pockets to get play and thrive in this market. Fortunately, you can take full advantage of a legal provision in the tax code and get a considerable leg up in your investment journey.

With the help of the credible 1031 exchange companies here in Idaho, you build your real estate empire with a little help from the government. Under this provision, you get to swap commercial properties without paying any taxes on capital gains.

Therefore, you can plow these gains to help you grow your portfolio.

Pick your replacement property carefully

It is only natural to want to maximize your gains when picking your replacement property. Unfortunately, this might open you up to some unforeseeable pitfalls that could cost you the exchange. See, a property exchange should take place within a relatively tight deadline.

You must conclude the exchange within a six months grace period. Otherwise, you lose all the tax deferment privileges. As such, tread carefully when picking a property that is currently under development. Any delays in the project completion could see you lose out on the deal.

The tax code doesn’t allow for any exception when engaging in a property exchange and as offers not extensions as a result.

Pick your exchanges carefully

Under the section 1031 property exchange, you can swap until you drop without paying a dime in capital gains taxes. The provision offers you a rare chance to increase your real estate holding. Therefore, you should only get into dealings with a great return on investment.

In addition to picking out properties of higher value, look at the income opportunities they bring. For instance, swapping a duplex for a condo in a prime location grows your rental income. Again, you can diversify your holding to let you venture into other profitable sectors such as farming.

You can simply swap one property for productive agricultural land and tap into the vibrant sector.

If you are looking for a simple and cost-effective way to cash in on the vibrant real estate market, you can’t go wrong with a 1031 exchange. You only need to be sure that you are making all the right moves along the way.

About the Author