Sometimes, you’re on the right track to building wealth, but then something goes horribly wrong. For instance, the location of your rental property could be overrun by insecurity, and this sends tenants scampering.
Or, a recent development could ruin what was once a pleasant and serene neighborhood, and drive the rental prices low. Such occurrences can cause your finances to take a beating, leaving you in bad shape. A tenant-in-common (TIC) 1031 investment offered by firms such as 1031 Exchange Place can help you.
Leverage your current property
When pushed to a corner, it only natural that you’ll start looking for a way out. Most likely, you’ll gravitate towards selling the property and taking the money elsewhere. Well, that is a great move, if not for a great disadvantage called taxes on capital gains.
A 1031 property exchange offers you a better way out. If you reinvest all the sales proceeds, every cent in commercial real estate, you get to escape the taxman. Deferring capital gains tax means that you have a higher capital investment for your next project.
Open a world of possibilities
While property in a bad neighborhood might have dismal rental income, the value of the property might be okay. Hence, you are likely to realize a tidy profit from the sale. Once you’ve disposed of the current holding, a world of possibilities opens to you.
You can buy low maintenance property in a nicer neighborhood, switch to another commercial sector or join conglomerate. In the latter option, you’ll use the money to buy a portion of large facilities such as a hotel, institution, shopping mall, or even an office block.
You’ll have no active management duties, but you’ll get a share of the rental income that corresponds to your ownership percentage. While lucrative, the commercial real estate sector is not its own set of unique challenges.
If the going gets tough for you, you can make a switch to better options without registering hefty losses.
If you make a mistake in the real estate sector, you don’t have to be stuck with a loss-inducing property or selling it off at a loss. You can take advantage of the 1031 property exchange and improve your position.