Loans can be a powerful tool in the hands of an investor using the 1031 Exchange. When exchanging properties, investors with access to financing opportunities customized to the 1031 process have an enormous advantage over borrowers who attempt to manually integrate the 1031 Exchange with a traditional loan product. Here, we will discuss three strategies investors use to leverage loans to improve the return of their 1031 Exchange:
- Exchange to a better property.
- Take advantage of an expiring opportunity.
- Retain holdings diversity.
Exchange to a Better Property
Pair the loan mechanism with the 1031 Exchange in order to exchange from a property of lower value into a property of higher value. When you achieve this exchange, your equity, earnings, and appreciation all increase in value and potential revenue.
Take Advantage of an Expiring Opportunity
Use the reverse exchange option to capitalize on an expiring opportunity now and sell lower-earning properties later which, when exchanged, can have the full tax-free proceeds retroactively applied to the purchase of the acquired property through the qualified intermediary.
Retain Holdings Diversity
Use a loan to keep two properties at once. In the case that you are not looking to consolidate all current holdings into a new property, you can use a loan to exchange from one property into two (or more) properties whose value exceeds the tax-free proceeds of the relinquished property sale.
Conclusion
There are many more strategies that investors might employ to make the most of their 1031 Exchange. Get assistance in identifying loan opportunities with the most favorable terms – schedule a meeting with one of our qualified loan professionals today.
