Many investors and sellers have to thank companies that offer 1031 property exchange services. These companies provide real estate investors the chance to defer payment of capital gains tax from the proceeds of the property they sold and then use the proceeds to buy a replacement property. For many, it’s a real life-saver since they could use what should’ve been directly paid to the government to buy a replacement property that they desire.
Companies offering such a service have staff called a Qualified Intermediary (QI), who is responsible for putting investment properties up for sale, purchasing replacement properties, and then transferring the deed to clients. The QI likewise holds the sales proceeds in escrow, takes care of all needed legal documents, and then ensures that everything is done in accordance with IRS rules.
Here are the top reasons you should get a 1031 exchange service:
You can have a great purchasing leverage with which to reinvest
One of the great things about hiring a company that offers such a service is that you’ll have the right guidance and assistance in filing for a 1031 exchange so you can have better purchasing power for reinvestment purposes. That means since you’re not paying capital gains tax outright, you can use that supposed tax money to invest in other properties that offer better investment benefits.
Conversely, you’d have limited cash on hand when you don’t file for a 1031 exchange since you’re obligated to settle the appropriate capital gains tax from the property that you just sold.
You can get better assets
With 1031 exchange, you can start from a five-figure investment property and then make subsequent exchanges until such time that you’re actually getting a property with a six-figure market value. It may seem hard to believe, but it actually happens.
This type of asset accumulation has been achieved by many real estate investors who kept investing in progressively better-value assets using 1031 exchanges. In the hands of a highly capable Qualified Intermediary, you can make such progressive acquisitions without breaking a sweat and in a completely legal and timely manner.
You can break free from burdensome management liabilities
Some properties are too costly to manage and maintain that they are no longer wise to hold on to. With a 1031 exchange, you can break free from such liability by acquiring a replacement property that has minimal to zero management requirements. This would not only take away stress from you but also help ease the financial burden associated with hiring a property manager.
You can defer capital gains tax
A 1031 exchange allows a property investor to defer payment of the capital gains tax or the tax that is paid for the sales of investment properties. In theory and in reality, you can defer paying such tax for as many times as you want since there is no limit to how many times a property investor can file for a 1031 exchange.
Be sure to contact a reliable 1031 exchange company soon, so you can facilitate the sale of your property and get a replacement property with ease.