While there are many advantages to diversifying your real estate holdings, sometimes consolidation can offer enormous opportunity to increase profitability and cut expenses for property owners. Here, we will explore two aspects of using a 1031 Exchange to consolidate your real estate portfolio:
- The benefits of consolidating your real estate portfolio.
- The process of exchanging multiple properties for a single property.
The Benefits of Consolidation
When consolidating real estate holdings, investors seek a single property through which they can run their operations in order to reduce overall administrative cost, tax complications, and reduce the number of contractors and partners necessarily involved in the process of maintaining a profitable rental property.
The Multi-Property Exchange Process
In order to consolidate multiple properties into a single property holding through an exchange, the property owner must identify their properties which they wish to exchange, as well as the potential properties that they might acquire with the cumulative tax-free proceeds of the relinquished property sales. After the exchange is filed and the relinquished properties close, the exchanger has 180 days to close on one of the single properties identified previously in the exchange.
Conclusion
Consider the benefits, process, and models for real estate portfolio consolidation through a 1031 Exchange. Many investors are beginning to take advantage of this powerful financial tool, and are rapidly maximizing the profitability of their investments because they do not have to forfeit 35% of the profits on their relinquished properties to capital gains taxes. Use the information here to identify ways an exchange could serve your portfolio, and schedule a consultation with one of our qualified professionals to better strategize how a 1031 could improve your real estate investments.
