A fairly straightforward investment strategy that many find quite profitable is the 1031 tax deferred property exchange, or like-kind property exchange. What is so appealing about this type of investments is that they are tax-deferred investments. This offers endless reinvestment opportunities for everybody, which makes this type of investment perfect for as a small business idea. 1031 exchange properties have a special law status, which makes them perfect to swap whatever properties you prefer. But below you will find more reasons why they are such an amazing investment idea.
1. They are tax-deferred
This kind of exchanges allow you to swap a commercial property for another one, without the usual taxes, that in most of the cases are quite significant. They assure the investor the opportunity to switch the profile of the property whenever they want and guess what type of properties will be successful in the future. All these, without worrying about the enormous taxes.
2. Increased cash flow for reinvestment purposes
Without the usual taxes, you will have more money for reinvesting purposes. You will have increased purchasing power, which will give you more investment possibilities and multiple financial benefits. Also, given the act that you can swap a single property for multiple properties, this gives you increased purchasing and reinvestment power.
3. No management worries
Like-kind property exchanges come with the great advantage that they allow the owner to get rid of unnecessary management duties. If you are the owner of multiple properties with increased management requirements, you could easily swap those with a single property with a less soliciting management.
4. A more profitable alternative to traditional real estate investments
Some consider 1031 real property exchanges to be the ultimate wealth accumulation tool. Continuously investing by using this tool will allow investors to accumulate more cash flow throughout their lives, which will result in a considerable amount of money. They are tax-deferred, which comes as a great advantage, and they might be the most profitable investment tool currently available.
5. You should know something about 1031 exchange before involving in one
It would be the best if you could get in touch with a professional counsellor in these matters. But we will provide some generalities. Although they are named “like-kind” property exchanges, the investor is not obligated to invest in a similar property. They can be different; the only rule is to have similar market values. Also, they must not enter in the possession of the money resulted from it at any time, therefore, they need intermediaries for managing the money. Moreover, a strict timeline should be followed, in order to accomplish the transaction successfully.
In order to manage these investments with success, you will need the help of a specialised company. Research the market well, because alternatives are plenty. Make sure the company has plenty of experience in the field and that they can offer the best services. You could check their portfolios if you want to see what kind of clients they dealt with previously.