There are many reasons investors love commercial investment properties but none compare to the 1031 properties avoiding depreciation recapture and delaying capital gains taxes when selling their investments.
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.
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 Lease 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, or office that can be selected from, the investor has endless choices.
If Triple Nets are not your cup of tea, don’t worry- you have many other alternative strategies to choose from to gain either passive income or a desire for higher returns.
You can purchase value add deals that require attention 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 gained from the gross rents minus the expenses equaling the net income.
Finally, after several years if a sale that would create a profit occurs, the investor can buy 1031 properties that will delay any long-term gain.
This can be done by simply trading into an equal or greater priced 1031 property that avoids capital gains taxes and a depreciation recapture of the sheltered income you’ve been collecting for years.
Around 25% of taxes is saved on the depreciation recapture portion of the sale(not counting the profit from the increased asset value).