So, you have chosen real estate to make a living. Making money right away is possible and this is thanks to income properties. The assets are either purchased or developed so as to make money. No product out there can provide you the flexibility or the possibility of high returns like real estate. There are many advantages to investing in income property. For instance, you can quickly resale property and earn a profit. What about capital gains tax? If you do a managed direct 1031 exchange, there are no reasons for fear or concern. Are you curious to find out more? If yes, then please continue reading.
Positive cash flow
In real estate, cash flow refers to the amount of money that remains after the rent is collected and the mortgage, taxes, insurance, and repairs are paid. When you know the cash flow, you can accurately calculate the return on the investment. If the income is higher than the expenses, then you can say that you have a positive cash flow. However, to build wealth and retire early, it is necessary to continue buying real estate investments. When you sell, the profit is increased in value and you will not be able to take advantage of it. If you go through with a managed direct 1031 exchange, you can keep your profits. The IRS will see that you are making a long-term investment, so the transaction will not be required to pay capital gains tax.
Tax bill perks
Capital gains tax is no something that you should worry about. If you join a managed-direct ownership program, you receive the best piece of advice for the 1031 tax-deferred exchange. But is that all? As a matter of fact, you enjoy many tax bill perks. For example, you can avoid paying social security and Medicare taxes. The reason for this is that rental income is considered passive income. It is not subject to that kind of taxation. Let us take another example: installment sales. The 1031 exchange is not the only real estate investment vehicle that you can make use of, although it is the best one. Thanks to installment sales, you can reduce taxes on the sale of your assets. Still, you need to have a portfolio, to begin with. Would it not be better to have the commercial properties overseen by professionals?
Real estate appreciation
It seems that real estate prices continue to drop. The market is not what it used to be yet this does not mean that the situation will not change anytime soon. Property prices tend to rise, especially in key areas. When this happens, you will make a significant amount of money. How? By selling the assets or engaging in a like-kind exchange. It basically the same thing, the only difference being that money goes into your pockets and not out of your pockets. Real estate property protects you, the investor, from the consequences of inflation. This means that it is worth giving it a try.