There are many reasons investors love commercial investment properties but none compare to the 1031 properties avoiding recapture of depreciation and delaying if not avoiding capital gains taxes, when eventually selling the investments for a profit.
Besides collecting steady income and hopefully a long term capital gain when selling and sheltered returns with depreciation benefits while holding, the 1031 or Starker IRS rulings can shelter and delay your tax consequences for being successful. I can’t think of a better way of keeping the most amount of income or cash flow derived from an investment vehicle than real estate investing.
The investment or income property purchased which could be a triple net leased property with no management or fix up issues along with the tax benefits just mentioned, makes this a grand slam investment strategy. With the vast diversification of asset groups from retail to warehouse, office that can be selected from, the investor has endless choices.
If triple nets are not your cup of tea, no worry you have many other alternative strategies to chose from to gain either passive income or the desire for higher returns and purchase value add deals that require your attention and man hours to create additional value through increased rents, whether through negotiation or fix-up of the physical property.
Once these initial purchases are achieved the investor may take depreciation against the income earned from the property and shelter some of the taxable cash achieved from the gross rents minus the expenses equaling the net income.
In the final act, after several years and a sale may occur that would create a profit, the investor can transact a 1031 exchange trade transaction that will delay any long term gain by simply trading into a equal or greater priced real estate property that avoids capital gains taxes and also recapture of past depreciation of the sheltered income, you the investor, has been collecting for years.
Around 25 percent tax is saved just on the depreciation recapture portion of the sale not counting the profit from increased value of the asset.Tags: 1031 exchange, 1031 property, capital gain taxes, commercial investment properties, tax