A 1031 exchange is a hugely important way for property investors to defer capital gains tax. Capital gains taxes can prevent investors from having the capital to make new, lucrative investments after a sale. This is why so many successful investors swear by 1031 exchanges.
If you are starting to consider using profits made from one property to invest in another property, you will likely be able to benefit from a 1031 exchange. The following are three reasons why you may benefit from it.
You will be able to buy a property of a higher value
By deferring capital gains tax, you will be able to buy a property of a higher value than you would otherwise. This will mean that you will be able to generate a higher rental price, and it is likely that you will also make a bigger return on investment (ROI) in the long-run.
You will reduce your need for loans
By having a better cash-flow due to deferring taxes, your need for loans will likely be reduced. This means that you will be able to have better cash-flow after you purchase the replacement property.
You will move through the process quickly
The deadlines that are associated with 1031 exchanges means that you will need to find a replacement property quickly. This can help you to move quickly to make lucrative investments.
If you want to increase your return on investment by being strategic about real estate, you should consider how 1031 exchanges could benefit you. They tend to be simple to implement as long as the guidelines are followed.
