Three words that can make or break an investor – capital gains taxes. The taxes from selling your investment property range from 15 to 30 percent, when state and federal taxes are combined. Ouch, there goes your profit margins or money for future investments. So how can you, as an investor, avoid them? The 1031 Exchange.
The 1031 Exchange is a powerful tool, making it a favorite among savvy and successful investment professionals. Let’s dive into the basics of the 1031 Exchange.
What is a 1031 Exchange?
A 1031 exchange gets its name from the Internal Revenue Code, Section 1031, which allows you to avoid paying capital gains taxes on an investment property upon its sale – as long as the profits are reinvested in like-kind properties. Like-kind refers to the nature or character of the investment rather than the form; therefore, any investment property can be exchanged for another type of investment property. In theory, an investor could defer capital gains on investment properties until death, potentially avoiding them altogether.read more about using 1031 exchanges
According to Institutional Property Advisors, household and job growth continue to be above the national rate, increasing apartment demand. In addition, the increasing home prices have caused shifts in living expectations, and residences with desired amenities in popular areas place homeownership out of reach for many. Therefore, keeping more residents in the rental market longer.
Rental demand intensifies and corporations are taking advantage of North Carolina’s business-friendly climate and steady job growth. As a result, all three of the state’s major markets have seen an employment surge. Greensboro / Winston-Salem metro recorded its strongest annual job creation rate in over 10 years, through September, as stated in a market report by Institutional Property Advisors.
Institutional Property Advisors reports, during the past four quarters the metro registered the second highest rate of job growth in the nation. The household income increased to nearly twice the U.S. rate of change, due to the expansion in the higher-paying professional and business services sector. These employment opportunities have led to more than 1,000 new residents to the region each week, creating a high demand for additional housing.