Your journey to building an impressive real estate empire begins by having a team of credible professionals by your side. Retaining the help of one of the reliable 1031 property exchange companies in Idaho gives you the necessary edge.
These experts will help you make the most of this tax code provision. With the right strategy, you can harness all the advantages that come with the process that entails deferment of capital gains.
1. Grow your portfolio.
Diversity is vital when looking to make the most of the commercial real estate market. Taking part in a property exchange lets you add a diverse range of properties to your portfolio. As long as the replacement property has a commercial application, it becomes fair game.
The first step in taking part in a property exchange entails identifying up to 3 replacement properties that you can buy with the sales proceeds. You then need to dispose of the current property then use the money to pay for the replacement properties.
It’s pretty much like a regular sale only that you don’t get to handle the money. You have the option to buy one or more replacement properties, depending on the size of your pocket.
Therefore, you can spread the new buildings across various sectors to minimize risk and grow your income. For instance, you can trade an apartment block for a swathe of agricultural land, a small warehouse, and an office block.
2. Escape bad markets.
The real estate market varies from one region to the next, making some markets more valuable than others. If your current holdings are in a declining market, it’s only natural that you’d want to escape to better regions.
Taking part in the property swap program lets you do that without slapping you with huge costs. As long as the replacement property is within the continental United States, you are free to venture there. That means you can take advantage of any emerging markets and grow the value of your investments.
Since you’ll be paying no capital gains tax, you can use the money to go after bigger and more profitable investment. Section 1031 lets you buy properties that are up to twice the value of your current holdings. Using capital gains means that you get to build equity in the new properties quickly without taking out huge loans.
3. Enjoy lifetime benefits.
While deferring taxable gains might seem like a temporary measure, it really isn’t as you can make the permanent. You only need to keep swapping the properties with bigger and better replacements as long as you reinvest all the sales proceeds into commercial real estate, you’re free and clear.
If you never sell the properties that you accrue under section 1031 exchange, you can pass these benefits to your heirs. In so doing, you can use the capital gains to pad their inheritance instead of paying it to the government.
If you’re keen to grow your real estate empire, you will do well to make property swaps party of your investment strategy. Section 1031 lets you exchange one commercial property for one of equal or higher value. That gives you the leeway to diversify your real estate holdings and spread them across several markets.