LEVERAGING A 1031 EXCHANGE TO BOOST YOUR MONTHLY INCOME

A 1031 exchange can potentially improve your cash flow by allowing you to exchange a low-performing investment property for one with higher rental income potential.

Here’s how:
When you exchange a property in a 1031 exchange, you can use the proceeds from the sale of the relinquished property to acquire a replacement property. If the replacement property has higher rental income potential, you can potentially improve your cash flow by increasing the amount of rental income that you receive.

For example, let’s say that you currently own a rental property that generates $1,000 in monthly rental income, but the property is in need of repairs and maintenance that will cost $50,000. Instead of spending $50,000 on repairs, you decide to sell the property and use the proceeds to acquire a replacement property that generates $1,500 in monthly rental income.

Assuming that the replacement property is of similar or greater value to the relinquished property, you can complete a 1031 exchange and defer paying capital gains taxes on the sale of the relinquished property. With the higher rental income, you can potentially improve your cash flow and generate a higher return on your investment. It’s important to note that there are no guarantees that a replacement property will generate higher rental income, and there are risks associated with any investment. However, a 1031 exchange can provide opportunities to improve cash flow and potentially increase investment returns by exchanging a low-performing property for one with higher rental income potential.

It's important to note that a 1031 exchange can be complex, and it's important to consult with a tax professional and qualified intermediary to ensure that the exchange is conducted properly and in compliance with IRS guidelines.

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