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FIVE REASONS TO EXCHANGE: "INVESTORS
CAN MEET MANY OBJECTIVES UNDER IRC §1031"
Section 1031 tax deferred exchanges continue to increase in popularity as
more investors nationwide discover the wide range of investment objectives
that can be easily met through exchanging.
I. PRESERVATION OF EQUITY
A properly structured exchange provides real estate investors with the
opportunity to defer 100% of both Federal and State capital gain taxes.
This essentially equals an interest-free, no-term loan on taxes due until
the property is sold for cash! Most often, the capital gain taxes are
deferred indefinately because many investors continue to exchange from one
property to the next, dramatically increasing the value of their real
estate investments with each exchange!
II. LEVERAGE
Many investors exchange from a property where they have a high equity
position or one that is "free and clear" into a much more
valuable property. A larger property produces more cash flow and provides
greater depreciation benefits, which therefore increase an investors
return on their investment.
III. DIVERSIFICATION
Exchangers have a number of opportunities for diversification through
exchanges. One option is to diversify into another geographic region such
as exchanging of one apartment builidng in Denver, Colorado for two
additional apartments - one in Los Angeles, California and the other in
Dallas, Texas. Another diversification alternative is acquiring a
different property type such as exchanging from several residential units
to a small retail strip center.
IV. MANAGEMENT RELIEF
Many investors accumulate several single family rentals over the years.
The on-going maintenance and management of what can be a far-reaching
group of properties can be lessened by exchanging these properties for one
property better suited to on-site maintance and management. Exchanging
into a single apartment complex with a resident manager is a good example
of this strategy.
V. ESTATE PLANNING
Often a number of family members inherit one large property and disagree
about what they want to do with it. Some want to continue holding the
investment and some desire to sell it immediately for cash. By exchanging
from one large property into several smaller properties, an investor can
designate that, after their death, each heir will receive a different
property which they can either hold or sell. Call the knowledgeable
exchange professionals at Asset Preservation for a complimentary
consultation regarding your specific investment objectives.
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