A 1031 exchange allows you to sell your investment property and exchange it for another property of equal or greater value. This allows you to defer paying any capital gains tax from the sale of your original property. It is also an amazing opportunity to increase your monthly cash flow! Here are a few of the basics:
Investment Properties Qualify
Any property held for investment, income producing or not, qualifies to exchange any capital gains.
All Proceeds Must be Reinvested
To defer payment of capital gains taxes after a sale, all proceeds must be reinvested. Therefore the new replacement property must be of equal or greater value.
Title Must Be Held in Same Entity
The ownership entity on title for the replacement property must be identical to ownership entity on title for the relinquished property, unless held in TIC.
1031 Exchange Cashflow Comparison
Let’s look at some key details for this 4-unit exchange (any size deal is eligible) and compare available exchange options.