The Benefits of a Section 1031 Exchange

a commercial building

You can’t afford to ignore the benefits that come with purchasing TIC real estate properties. Under Section 1031 of the Tax Code, you can dispose of commercial real estate property and replace it by buying a more substantial property. Usually, TIC properties are large, institution-grade properties that are way above your buying ability. Under this arrangement, you can buy a portion of the property and reap the benefits that come with it.

Get More Out of Life

While the real estate sector is quite lucrative, managing a broad portfolio can prove to be a tough nut to crack. You have to put up with all kinds of problematic clients who are likely to give you lots of sleepless nights. You also have to keep the property in great shape, which means fielding midnight phone calls about backing toilets. Juggling such responsibilities with your other interests can prove to be too much to handle.

Getting into TIC arrangement lets you escape these management responsibilities without putting your investment at risk. Most TIC properties are managed by professionals, giving you peace of mind. You get to earn handsome returns on your investment without lifting a finger. It means that you have a great source of passive income to enable you to live your life as you wish.

Grow Your Income

The real beauty in commercial real estate lies in having steady and paychecks coming your way. That way, you get to plan your income and have greater control of your finances. If some of your properties fail to live up to these expectations, taking part in a property exchange can provide you with a way out. You can swap the loss-making holdings for those with better prospects.

Under such an arrangement, you can dispose of the property and buy in a more desirable location. Since you get to hold on to the capital gains, you can buy a better property, which translates into an increase in your rental income. You can also switch from one type of commercial property to another to grow your prospect. Of course, you have the option to enter into a tenants-in-common arrangement.

Diversify Your Portfolio

checking their money

Regardless of what type of property exchange you favor, they all offer you a chance to grow your real estate portfolio. If you go the traditional route, you can swap a block of apartments for an office block, a warehouse, or agricultural land. Since the limiting factor is the total value of the replacement property, you can buy a boatload of properties.

Well, that is as long as their total value doesn’t amount to more than twice the value of your original property. You can also buy a share in many TIC properties and diversify your risk. TIC properties make a great choice when looking to beat the tight timelines that come with the property exchange process.

Taking part in a Section 1031 property exchange is a great way to grow your investments in the commercial real estate sector. By allowing you to defer capital gains taxes, it arms you with bigger pockets when making your next acquisition. It also lets you grow your portfolio as well as your rental income.

About Eleanor Sharp
Eleanor Sharp is the author of AGSE Law. As a paralegal, she has worked with attorneys in many fields to ensure their clients get the best advice and representation. She is passionate about helping people understand the complexities of the legal system so they can make better decisions for themselves. Eleanor loves reading, travel, and spending time with her family. She hopes her articles will help others navigate life’s legal intricacies with confidence.