There are several financing opportunities available to investors who use the 1031 Exchange to improve their real estate portfolio. Here, we will discuss how to use a loan in the process of a 1031 Exchange.
Avoid Burning Liquidity on a Return-Yielding Property
If you want to retain your cash holdings, you may want to leverage a loan so that your liquidity isn’t tied up in the equity of your property. In this case, the interest on the loan is offset by both the yield of the rent payments as well as the appreciating equity of the land and building.
Leverage Equity and Tax-Free Profit as a Down-Payment
When using a 1031 Exchange to purchase a property, you can take the 35% capital gains tax you would have paid to the IRS on the relinquished property sale and include it in the down payment for the acquired property instead.
When you take advantage of the benefits a loan can offer real estate investors, you retain cash you have, make the most out of the equity you own, and are able to command more favorable loan terms for your acquired property. Schedule a consultation with one of our loan experts to build a profitable loan strategy for your 1031 Exchange.