Investing in real estate can provide significant financial opportunities for individuals and build generational wealth for families for years to come. And like many pursuits, there is more than one way to achieve success. However, following time-tested, risk-tolerant strategies can significantly alter the course in your favor, especially when it comes to a tax strategy.
For Ohio property investors, taking advantage of the numerous tax incentives available can be a strategic way to grow your portfolio. One such incentive to help you maximize savings on a sale and make the most of your investment strategy is to leverage a 1031 exchange when selling and reinvesting in Columbus real estate.
Using a 1031 Exchange to Grow Your Portfolio
A Section 1031 exchange, also known as a like-kind exchange, enables real estate investors to sell one type of property for another similar property that will be used for the same purpose.
The primary advantage of this IRS-sanctioned tax deferral strategy is that it allows investors to defer the capital gains taxes they would otherwise have to pay when selling an investment property. As long as an investor channels the proceeds from the sale into another similar property, they can defer payment of the capital gains taxes.
This tax strategy allows your investment to grow tax-deferred until you decide to eventually sell your property for cash many years down the road. Even better? There is no limit to the number of 1031 exchanges you can do.
Benefits of Leveraging a 1031 Exchange in Ohio
As mentioned, one of the primary benefits of a 1031 exchange is being able to defer capital gains taxes, but there are others, including:
- Diversifying your portfolio – Market conditions change and so do your investment goals. With a 1031 exchange, you can sell one type of property and invest in another that better aligns with where you want to grow next.
- Increasing cash flow – By deferring taxes, you can allocate more capital towards the purchase of your replacement property, which may lead to increased rental income and cash flow.
Section 1031 exchanges offer many benefits to investors looking to grow their real estate portfolio. And as always, before pursuing one it’s best to consult a qualified professional to ensure that you are adhering to all state and federal requirements and guidelines.
At RL Property Management, our priority is to help investors maximize their earnings and minimize their spending by taking a strategic approach to property management. To learn more about how we can help you be successful with your investment in Columbus, Ohio, contact us today.
