How a 1031 Exchange Offsets the Cost of a Loan

With a 1031 Exchange, investors can offset the liability of loan interest by borrowing to upscale your investment portfolio into an exponentially more profitable entity.

The cost of loans is often calculated against the advantage of accumulating equity. However, with a 1031 exchange, tax savings can be rolled directly into equity in a new property so that both equity and tenant payments work in tandem to offset the cost of loans, which is often for a significantly lower amount since all profits from the relinquished property are allocated to the acquired property, reducing the overall amount of the loan and its interest (read more about how to boost your portfolio’s profitability with a 1031 Exchange).

Tax Savings Become Useable Equity

When you don’t cut 35% of your profits due to capital gains tax, you can instead apply those funds to the purchase of a new property, in which those funds become equity in your portfolio rather than loss to taxes (read more about how to use a loan in a 1031 Exchange). When identifying a property through a financed 1031 Exchange, investors are able not only to take advantage of the full amount of profit from their property sale, but can also identify purchasable properties more valuable than their previous property, as enabled by the pre-approved loan amount.

More Revenue Pays Off the Loan Faster

hen you acquire a new property that has more revenue-generating potential, the value of the exchange compounds over time as this revenue is used to pay the loan principle, laying a foundation for more equity-based borrowing in the future while at the same time increasing the current overall value of the portfolio (read more about how to pair real estate portfolio consolidation with a loan for a 1031 Exchange).


Investors can extract all three of these benefits from an exchange by using a loan to increase equity in their holdings, boost revenue from their properties, and pay off interest-accumulating loans faster. Schedule a consultation with one of our loan experts to build a profitable loan strategy for your 1031 Exchange.

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We know that 1031 exchanges, real estate financing, and everything in between can be confusing, and a 10 minute phone call can help clear things up. So give us a call or schedule a consultation today, and we’ll be happy to talk through your specific needs.