Using 1031 Exchanges to Come Out Ahead in a Booming Commercial Real Estate Market
Although expected to decline 10-15 percent by year’s end after a period of atypical growth in 2015, the commercial real estate market continues strong, with billions of dollars in foreign capital continuing to flood the United States. This boom has led to low inventory, particularly in the prime areas, making it difficult, though not impossible, to acquire desirable investment properties.
The question is, How long will it be before rising interest rates send commercial real estate prices lower again?
Investors may have a brief window to maximize their portfolios. Using a “like-kind” exchange is an excellent way to upgrade one’s commercial real estate holdings while at the same time deferring the tax burden from the sale of properties that have increased significantly in value.
1031: The Basics
A 1031, or “like-kind,” exchange gives investors a way to redirect profits from the sale of an investment property directly back into one’s portfolio without having to pay the capital gains tax that would ordinarily come due at the end of the transaction.