Skip To Content

5 Benefits To Do A 10-31 Exchange in California

Owners of investment property that want to purchase another property while selling their current one often face dilemmas that prevent them from doing so, such as being liable for capital gains tax. Luckily, investment property owners can benefit from a tax break known as the 10-31 Exchange. A 10-31 Exchange allows property owners to easily transfer capital gains taxes, provided that the property they’re purchasing is considered like-kind (in other words, is of the same or similar value) to the IRS.

Here’s all you need to know about a 10-31 Exchange and how it can be beneficial to apply for one in California:

1. You can consolidate many properties into one

An exchange offers flexibility, which allows investors to change one property for several. This means a property investor is able to exchange two or more properties for a new property of the same value in any location in the United States. For example, an investor might decide to consolidate two of their Californian properties for a bigger property in another state.

2. You can exchange a building that makes no money for one that does

If you own land or a building that generates no income, you can exchange that for a commercial building that does. This flexibility ensures that you’re able to get a return on investment, which allows you to build wealth and bounce back from any mistakes you might’ve made regarding the area and type of property purchased. It has to be an equal trade.

3. You can exchange a high maintenance building for one that’s easier to manage

Managing multiple buildings can be challenging and stressful. With a 10-31 exchange, an investor can choose to decrease the time and effort they put into managing their buildings by consolidating into a property investment that requires far less to manage on a daily basis.

4. You can leverage your cash

Investors can take advantage of the 1031 tax-deferred exchange to acquire a more valuable investment property. By utilizing the money they would have paid to the IRS in taxes, they can increase their down payment and improve their overall buying power to acquire a more expensive replacement property. Thus, leveraging their cash and continuing to build wealth through real estate investment.

5. You’ll improve your purchasing power

By deferring capital gains tax through a 10-31 exchange, you’ll be able to increase your purchasing power with the additional money that you have leftover. This means you’ll be able to purchase more properties which will also generate income.

Doing a 10-31 exchange offers many benefits which include being able to defer capital gains, the ability to consolidate multiple properties, financial flexibility, improved purchasing power, and more. Consider consulting us for more information on how you can benefit from California’s 10-31 exchange. 619-944-5972.