1031 Properties: What’s the big Deal about 1031 Exchanges?

Written by admin on May 6th, 2011

You’re probably hearing a good deal about 1031 properties if you’re considering real estate investing. Whether this is your first investment or you’ve been around the block a time or two it’s a good idea to sit back and really examine what 1031 property exchanges can mean for you and your future in real estate investing.

1031 Exchanges are Ideal for Long-Term Investment Strategies

If you’re a planner this is definitely your kind of thing. The premise behind property exchanges is that you can freely increase or improve your real estate holdings without paying the penalty of capital gains taxes at every stage of the transition. This means you can buy small today for your initial property investment and build up to properties that have greater value. This allows you to grow your nest egg over a period of years without drastically changing your initial investment or suffering through the pain of taxes in order to do so.

Setting and Meeting Goals with 1031 Properties

There are many ways you can set goals for your future investments. Would you believe that 1031 exchanges give you an excellent tool for meeting those goals? Your first priority when you’re planning to invest for bigger and better things in the future is to make plans to improve those investments or increase the value in time. Most people buy real estate with the understanding that its value will grow. But you can help it along by exchanging or trading without fear of losing all the benefits to taxes thanks to the 1031 exchange policy the IRS has in place.

Grow your investments without worry because you can go from a small initial property and expand to a larger property that has much greater value (and growth potential). All the proceeds from the “sell” of the original property are invested as equity into the next property and you don’t owe any taxes until you decide to “cash out” of your real estate investments and living on the proceeds.

Checks and Balances with 1031 Investments

Another part of the big deal about 1031 properties is that they serve as a sort of checks and balances system to gauge your progress. You’ve already set your goals and know what you want to achieve from your investments. At various stages of the game, you can “trade up” to get closer to your goals so that you are staying on task and on target. Few other investment options allow you this luxury as an investor.

Now is a great time to dive in and see what property exchanges can mean for your financial future. Chances are you’ll find plenty of benefits to make this type of investment well worth your while and completely understand what the big deal about 1031 properties really is by the time you’re done.

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