Tulsa Commercial Real Estate Experts: Why Would Anyone Want To Do A 1031 Exchange?

Tulsa Commercial Real Estate Experts: Why Would Anyone Want To Do A 1031 Exchange?

by U.S. SBA Entrepreneur of the Year & Cofounder of Fears & Clark Tulsa Commercial Real Estate Group – Clay Clark

If you are seriously considering doing a 1031 Exchange we would highly recommend that you would consult a tax preparation specialist and financial advisor, however we have tried to lay out some of the most common reasons to consider doing a 1031 Exchange. The most common reason for doing a 1031 Exchange are related to your ability to defer taxes so that you can reinvest the tax savings into additional properties. Some of the less common reasons for doing a 1031 Exchange are described below:

Diversification of your equity. Some people believe that diversification is very important aspect of investing in commercial real estate and nearly all forms of investing. Sam Walton did not believe this way and Andrew Carnegie did not either, but various financial advisors do get pretty excited when they talk about diversification. How’s your mutual fund doing? Anyway, the theory here is that you can spread your equity out to acquire a more valuable property or properties.

Leverage of your investing spending power – Many financial advisors believe that it is very important to leverage your spending power as much as possible. If you do buy properties for a price that is significantly below the appraisal value this might be a good idea. If you buy commercial properties that are producing significant amounts of cash flow this also might be a great idea. If you leverage yourself too far by investing in properties that are costing you money and not producing you a healthy monthly cash flow this could be a bad thing.

Increasing your cashflow – Some investors have experienced much success by actually moving the equity they have acquired over the years from a low revenue producing commercial real estate property into a much higher income producing property. Many times some of the best income earning properties are office / wharehouse, industrial or retail properties.

Strategically planning your estate – One strategy that many investors have used over the years is to use their deferred gains taxes to increase the value of the estate they plan on leavin to their heirs. I personally planning on spending every time that I have acquired before my death, but that is just my personal feeling on the subject.

Increasing the depreciation one can take – A strategy of many investors is to change the type of properties that they are investing into to take full advantage of the best and most favorable depreciation schedules. Some types of properties allow the investor to take aggressive depreciation while others severely limit the investor’s ability to offset his income with depreciation.

Relieving the need for excessive management – One of the most popular reasons for trading a piece of commercial real estate is to decrease the amount of management needed to make a profit with one’s real estate holdings. As an example, theis one Tulsa commercial real estate client of ours that originally built up his wealth through the purchasing, fixing, and selling of undervalued small residential homes. Eventually he teamed up with another investor and they began building up significant levels of wealth quickly by flipping numerous homes quickly. As they moved on from one flip project to another, they gained more and more wealth however their time was becoming leveraged significantly because many of the projects required huge amounts of their personal time. Because cloning technology had not been invented yet, they decided to get out of the small time projects by selling them all as a package before transitioning into the world of Tulsa commercial real estate investing. Soon they purchased an undervalued shopping center that they were able to add value to by fixing up and by leasing out to quality tenants. Today these two partners own a few commercial real estate properties that produce good cash flow and their time is freed up to discuss Brett Favre or to do whatever it is that they want to do.

For more information about the 1031 exchange program, purchasing Tulsa commercial real estate, Tulsa commercial real estate, Tulsa commercial office buildings, Tulsa office buildings, Tulsa real estate, Tulsa office space, Tulsa commercial space available and Tulsa commercial investment properties please feel free to contact our expert team of commercial real estate professionals today at 918-481-2080. Or you can visit us online at www.FearsClark.com.