Benefits of a 1031 Exchange

Deferring taxes can be a powerful tool for building wealth.

Leverage

With the funds saved by deferring capital gains and other taxes on the sale of one property, investors have increased funds available for the purchase of a larger property.

Diversification

Investors can expand the number or types of property in their portfolio, perhaps purchasing properties in multiple markets or states.

Consolidation

Investors can sell smaller properties and purchase one larger property to maximize ownership benefits and reduce management responsibilities.

Cash Flow

Investors can sell a property that is producing little or no income (such as land) and purchase property or properties with greater cash flow performance (such as a retail shopping center).

Management Relief

Investors who no longer want to manage high-maintenance properties can reinvest in properties requiring little or no management.

Increase Depreciation

Investors can exchange from a non-depreciable property (such as raw land) to a property that can be depreciated.

Estate Planning

Investors may continue to replace properties through consecutive 1031 exchanges, preserving profits until and estate can be passed down tax free (if under the tax cap).