As a real estate investor, your primary goal is to make as much money as possible without paying very much, if any, money out in taxes. However, to help lower your yearly obligation, you should look at using legal loopholes that are available to you.
You may want to keep as much money in your portfolio by moving it around instead of cashing it out to your personal bank accounts. You can lower your burden to the IRS and state by using rental property 1031 tax delayed exchanges.
Buying More Property
When you decide to use rental property 1031 tax delayed exchanges, you can use the profits from one sale to buy more real estate. This loophole allows you to use the dividends from a sale to purchase even more property. However, to use the loophole properly, it is vital that you do not allow those dividends to be deposited into your personal savings or checking accounts first.
Instead, you should transfer the dividends from the sale directly into a new home purchase. It may help you to have the real estate that you want to buy chosen and ready to purchase. Once you sell the property that you want to unload, you can immediately shift the cash from it to the new purchase. You avoid having to pay taxes on the dividends and can instead add more assets to your portfolio.
Rental property 1031 tax delayed exchanges can also allow you to diversify your portfolio. If, for example, you are only invested in residential properties right now, you can use the money from those properties to diversify and buy commercial properties or empty lots of land. You should feel like you are restricted from using the proceeds from your leased properties to buy different kinds of real estate. You can use the funds to purchase other types of real estate that may offer the promise of a solid return on your investment.
Rental property 1031 tax delayed exchanges can also give you more capital to strengthen your portfolio and make it more lucrative for you to maintain. They can increase your net worth on paper and give you more purchase power to invest in other assets, such as commodities and bonds.
Rental property 1031 tax delayed exchanges can offer a number of advantages to investors like you. They lower or eliminate the taxes that you pay each year and can also diversify your portfolio and strengthen your purchase power.