Benefits of a 1031 Exchange
Deferring taxes can be a powerful tool for building wealth.
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.
Investors can expand the number or types of property in their portfolio, perhaps purchasing properties in multiple markets or states.
Investors can sell smaller properties and purchase one larger property to maximize ownership benefits and reduce management responsibilities.
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).
Investors who no longer want to manage high-maintenance properties can reinvest in properties requiring little or no management.
Investors can exchange from a non-depreciable property (such as raw land) to a property that can be depreciated.
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).
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