How can I use Section 1031 to boost my real estate investments?

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Since 1921, Section 1031 like-kind exchange has been used by real estate owners to exchange their property for other income-producing real estate and defer the tax on any unrealized gain. The replacement property should be of equal or greater value than the assets sold. You must identify a replacement property within 45 days and then conclude the exchange within 180 days. A 1031 exchange doesn’t make capital gains tax go away; it just postpones it.

There are various reasons for an investor to choose a 1031 exchange including:

  • Better cash flow from a property,
  • Less hands-on property management,
  • A more desirable location,
  • Cultivating inclusion and diversity,
  • Investing in low income or inner-city neighborhoods, and
  • Many other investment goals

An Ernst & Young study found that 1031 exchanges generate $4.4 billion in additional investment and 568,000 jobs each year. It promotes job growth for people from all walks of life. Most properties exchanged are owned by mom-and-pop investors and sole proprietors such as partnerships and S corporations. Section 1031 is also known as an equal opportunity tax code provision. It allows individuals to grow their wealth and assist and incentivizes sizeable real estate projects in underserved markets. As we strive to become more diverse and inclusive in our communities, the like-kind exchange can provide more productive uses for the outdated, worn and unwanted properties by turning them into affordable housing, retail centers, or job-generating hubs. If you want to take advantage of this powerful investment tool, speak to an expert in Section 1031. Never do an exchange without professional assistance.

Meet the Expert

Viviana Writer is a real estate agent with Prosperiti Brokers in the Springfield, MO region providing buyers and sellers with professional, responsive, and attentive real estate services. Want an agent who'll really listen to what you want? Need an agent who knows how to effectively market your commercial or residential property so it sells? Prosperiti Brokers is a boutique brokerage with Midwest values and a national reach. The company mission is to help the communities they serve to prosper.