Some of the benefits of Tenants-in-Common 1031 exchange program are:
· A 1031 property exchange can provide increased cash flow. Properties producing little or no income can be 1031 exchanged for successfully operated commercial properties offering investors a steady and reliable source of income.
· Escaping management responsibilities, sole property owners can convert an active investment to a passive one, allowing them to continue enjoying the financial and tax benefits of real estate ownership without the management duties.
· Investors do not have to do all the leg work in finding, buying, and financing the 1031 replacement property. The sponsor of a tenants-in-common program generally has done the leg work, research, and acquisition of the property for the benefit of the investors.
· 1031 exchange properties are readily available. In order to qualify for like-kind exchange under the Internal Revenue Code, an exchange has to be done in a timely fashion. With 1031 replacement properties already available, a large part of this timing problem can be eliminated.
· Going through a sponsor with a track record of doing IRS 1031 exchange properties can give investors the opportunity to participate in quality institution-grade properties.
· 1031 tax exchange allows for the tax advantages discussed in other sections. These include the deferral of taxes and the usual tax benefits that come with real estate investing, for example, deductions for activities related to the real estate as well as depreciation. Investing in oil will result in the tax advantages of depletion allowance.
· 1031 replacement properties generally involve non-recourse debt. Banks look to the properties generally, although there are exceptions to this that can happen when investors violate certain rules or there is intentional activity, but by and large, this has not been a problem when proper legal advice is sought in advance of investing.
· Ability to take a certain dollar amount and make it fit into a piece of property. When there are other investors, it makes it easier for each investor to participate at different levels that fit the investors’ budgets. Many minimum investments start at $100,000.00. Some are lower, many are higher.
· Diversified real estate portfolios. As discussed in other sections, it is easier to place certain dollar amounts in multiple, different properties. Therefore, investors may have a better chance of diversifying geographically as well as by asset class ( retail, apartment, office, oil, hospitality) rather than holding everything in one property.
· Investors can take advantage of institutional-grade properties in different geographical areas that may have higher upside potential than the area they are in.
· There are some advantages related to estate planning when dealing with institutional, well maintained properties by third parties rather than the estate having to do this.
