A 1031 exchange offers a lot of flexibility. Aside from the tax benefits, investors can consolidate, diversify, move markets, or increase income potential on their current investment property.
Some people choose to do a 1031 exchange to acquire more income. For example, they can exchange vacant land for commercial or residential property. The investor is able to increase income potential by exchanging a property that is not generating any revenue, such as land, into real estate that has greater income potential like commercial and residential real estate.
Another advantage of doing a 1031 exchange is consolidation. Depending on the investor’s situation, they may not want to manage multiple properties. They can exchange their properties into one larger property that is easier to manage. Others are tired of managing properties and of being a landlord altogether. These investors can exchange from a residential or commercial property into a more manageable and less time-consuming piece of land.
Some investors are looking to diversify. With a 1031 exchange, they can exchange one property for multiple property types. For example, an investor can exchange their residential land into a commercial, residential, and vacant piece of land.
A 1031 exchange is great for investors who have multiple properties in other states or for investors who are moving markets and would like to exchange into a property that’s in another state. Instead of traveling from state to state to manage multiple properties, they exchange the out of state real estate into property that’s in one state. If the investor is moving markets they can also move their investment property to the state they are moving to.
1031 Exchanges offer other advantages/benefits in addition to tax savings. Every situation is unique, and it is always advised that the taxpayer consults with his or her tax advisor before making any decisions.
For questions on ways to do a 1031 exchange or to start your exchange, call Midland 1031 before your closing on the relinquished property at 239-333-1032, or go to www.midland1031.com.