If you are looking for a way to ride the popularity of the real estate investment sector without having an active management role, why not consider a 1031 tenant in common property exchange.
Investing in real estate remains a popular way to build and create wealth. Owning rental units is a sure way to build equity and maintain a steady monthly income. However, managing rented accommodation is an intensive task. If managing rental property is not for you, there is a way to escape such responsibilities without dropping out of the real estate game.
Trade up your holdings
Tenant in common exchange, TIC for short, is a form of barter trade in the real estate sector. Instead of making a regular property sale, you can exchange your current holdings for TIC properties.
In this case, you swap your current property holdings for a percentage of a large property, one that is beyond your price range. For instance, if you paid $500,000 for a duplex ten years ago, the current value might be closer to a million dollars.
In a regular sale, your capital gains are liable for taxation. However, if you opt for a 1031 property exchange, your tax is deferred and you can use the entire proceeds to buy a small stake in a multimillion-dollar property, such as a high-end office complex. That way you get to keep all your gains while having a substantial rise in rental income. The TIC 1031 exchange is increasingly popular, and several companies, like 1031EX.com, navigate the legal and tax complexities to make the process easier.
Avoid active management role
Owning a portion of an institutional grade property makes you a silent partner in the business while escaping the rigors of management. Best of all, this partnership is not taxable so you’ll not have to declare it in your tax returns until you decide to sell your stake. Any profits that the venture realizes are prorated among all the investors. Hence, you can enjoy your retirement while still making handsome returns for your real estate investments.
Real estate properties offer many opportunities to build and grow your wealth. With a 1031 property exchange, you can ride the property wave and grow your wealth without an active management role.