When is the timing right for real estate investors to use 1031 exchanges to trade property and restructure their portfolios?
Most real estate owners and investors should now be aware of 1031 exchanges. Most are aware of their benefits. Yet, many are not sure if it fits their current plans – or when the right moment to use them is. To clear this up, here are six scenarios in which you should be using 1031s…
1. When Selling Property
If you’ll be selling a property, and you’ll be reinvesting at least some of the proceeds, you should definitely consider a 1031 exchange. You can still take out some cash if needed, but any gains you put into new properties or property improvements may be sheltered from taxes by using a 1031.
2. When Acquiring New Real Estate Assets
If you are buying a new investment property or business property and are likely to liquidate another property soon, put an exchange in place. A reverse 1031 exchange can give you the same tax benefits, even if you buy first, then sell an existing asset.
3. When an Asset Has Peaked
Once you have maximized the performance of a property, or it is topping out in value, then it can be wise to exit it, and find others with more room for growth. A 1031 will help preserve the maximum gains.
4. When the Market is about to Shift
When the market is showing signs that is may be about to see a decline in rents or property values, it can be smart to exit, and use an exchange service to put that capital into other markets which will better preserve capital, and diversify your portfolio.
5. When You Need to Minimize Taxes
When you are dealing with a higher than expected tax liability, or are afraid of incurring more taxes, then use 1031s to defer taxes and gain liquidity in investing.
6. When You Need a Performance Boost
When your wealth and passive income just isn’t growing fast enough then consider utilizing an exchange to acquire more profitable property assets. That may be simply switching properties, or moving into new destinations, or switching from one property type to another i.e. residential to commercial real estate, or office to mixed use.
Get a list of prime NYC properties for 1031 exchanges by emailing Contact@TheRatnerTeam.com or take advantage of a complimentary consultation with a 1031 exchange attorney to see if it is the right move for you by clicking here.
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