With a global financial market that is known to be volatile at times, investors are often looking for a stable and predictable place to put their money. Similar to buying a bond, investing in triple net lease properties is one of the smartest and most reliable investment tools available today.
While we know this is a great opportunity for many investors, it can be confusing to those unfamiliar with commercial real estate or 1031 exchanges. Let our experts walk you through the basics of buying and selling net lease properties.
At its simplest, a 1031 exchange refers to the exchange of certain types of like-kind property, where the owner may defer capital gains typically due upon sale. The Internal Revenue Code, Title 26, Section 1031 says: "No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment if such property is exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment."
Basically, an investor can swamp or exchange their property without cashing out or recognizing a capital gain, thus allowing the investment to grow tax deferred. There is not a limit on how often or how many times an investor is able to do a 1031 exchange, so it’s possible to avoid capital gains taxes over a long-term period.