If a real estate investor wants to make use of the Internal Revenue Code 1031 but thinks that it is only available to an investor with a multi-million dollar property, they would be mistaken. The 1031 exchange is perhaps the most powerful tool that an investor has available to them if they want to sell their property and even get out of any type of property management as well.
The 1031 real estate exchange is so powerful because is available to all investors, regardless of the size of their holdings, as long as the property has been used for investment or business purposes. No matter whether you are interested in selling undeveloped land, a multi-family dwelling, a strip mall or hotel property, the 1031 is a great tool to use for deferring non-recaptured depreciation and capital gains.
If you are an investor who normally chases market appreciation, then you need to realize that it only makes sense if investments produce enough revenue to justify their existence. Taking advantage of the Internal Revenue Code 1031 will give you the ability to redirect your investment money without having to incur any capital gains taxes. In a tenuous market, you can do yourself a big favor be realigning your real estate holdings and taking advantage of the market bargains as they become available by utilizing a 1031 exchange.
One of the biggest developments in the section 1031 exchange is the variety of replacement property choices that now exist. Originally, investors were limited to locating new property that would carry pretty much the same headaches as their old property; however, IRS procedure 2002-22 codified TIC exchange (tenant-in-common) and this was basically the birth of a new real estate industry.
For the investor who is fed up with hands on management due to the increasing operating costs and high capital improvements that become necessary, the Internal Revenue Code 1031 exchange is a perfect solution to their exit strategy. Under a section 1031 exchange, an investor can obtain TIC interest that will eliminate the hassle of management, as it turns all of that over to a team of experts, and they will still receive a steady income. And at a later time they are able to avoid capital gains by exchanging their property and eventually turning it into their primary residence, thus giving them a great retirement property.