As a storage unit facility owner, you may be considering selling your facility. One strategy you may want to consider is using a 1031 exchange. A 1031 exchange, also known as a “like-kind exchange,” allows you to sell your facility and use the proceeds to purchase another property without paying capital gains tax on the sale. Here are five benefits of using a 1031 exchange.
- Tax deferral: By using a 1031 exchange, you can defer paying capital gains tax on the sale of your facility until you sell the replacement property. This allows you to keep more of your money to invest in the new property.
- Increased buying power: By deferring capital gains tax, you can use the proceeds from the sale of your facility to purchase a more expensive property. This increased buying power can help you acquire a property that better meets your investment goals.
- Diversification: A 1031 exchange allows you to sell a property that may not be performing as well and use the proceeds to purchase a property in a different market or asset class. This can help diversify your investment portfolio and reduce risk.
- Opportunity to upgrade: A 1031 exchange can provide an opportunity to upgrade your facility by purchasing a newer or larger property that better meets the needs of your tenants.
- Flexibility: There is no requirement on how you must use the proceeds from the sale of your facility. You can use the proceeds to purchase multiple properties or a combination of properties, such as a storage facility and a rental property.
Free Consult on Doing a 1031 Exchange
Overall, a 1031 exchange can be a valuable tool for storage unit facility owners looking to sell their property. It allows you to defer paying capital gains tax, increase your buying power, diversify your investment portfolio, upgrade your facility, and have flexibility in how you use the proceeds. It’s important to be aware of the rules and deadlines that the IRS has set in order to qualify for this exchange and to consult with a tax professional.
