3 Reasons To Consider A Rental Property 1031 Tax Delayed Exchange
If you are planning to sell a rental property that you currently own, you may wish to consider what is known as a rental property 1031 tax delayed exchange. If you are not familiar with this type of tax deferment, a 1031 tax delayed exchange allows you to delay the federal income and capital gain taxes associated with the sale of your rental property when using the proceeds from this sale to purchase another rental property. Continue reading to learn more about a few of the primary reasons choosing to use this type of tax deferment may be beneficial to you.
Increased Buying Power
As you may already know, the amount of buying power you have when it comes to real estate will be directly impacted by the amount of money you have to use as a down payment. The more money you are able to put down, the more money you are likely to qualify for when applying for financing. By allowing you to utilize the full amount of your equity to purchase a new rental property, the use of a 1031 tax delayed exchange can help to increase your overall buying power.
Potential For Increased Monthly Income
The more you are able to invest in a rental property, the higher-quality property you will be able to purchase. Since the value of the property directly relates to how much you are able to charge each month for rent, a 1031 tax delayed exchange can allow you to increase your monthly income without the need to increase the overall number of properties that you manage at any given time. If the primary reason you chose to invest in real estate was to create a residual income, this feature can prove extremely beneficial at helping you to accomplish your financial goals.
Ability To Grow Wealth Faster
In addition to increasing the amount of income you have coming in, a 1031 rental property tax delayed exchange can help you to grow your wealth by increasing the value of your assets in relation to the amount of debt that you carry. Not only can this help you in future investment endeavors by allowing you to potentially qualify for additional financing options, but it can prove quite useful in your personal life as well since the larger your net worth is, the more likely you are to qualify for a wide variety of financial products.
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