Learn How 1031 Exchanges Can Significantly Grow Your Portfolio
Request Investor PresentationMany investors appreciate the value of having real estate in their portfolio. It provides CRE Income Fund 1031 diversification beyond stocks and bonds, generates an income stream, acts as a hedge against inflation, and builds wealth over time.
However, when investors sell the property for a profit, they can be hit with a hefty capital gains tax— unless they take advantage of a 1031 Exchange. This provision of the tax code allows investors to defer that capital gains tax by reinvesting the proceeds from the real estate sale into a similar property. They can also use a 1031 Exchange to buy an interest in a Delaware Statutory Trust (DST) that owns multiple properties.
How a 1031 Exchange works
The name comes from the section of the tax code that allows the exchanges. With a 1031 Exchange, you are essentially swapping one investment property for another without recognizing any of the profit. The original property’s cost basis—largely the purchase price—becomes the cost basis of the new property. The transaction remains tax-free until you eventually sell the second property and pocket the gains.
After selling the first property, you must reinvest the proceeds in a “like-kind” property. Like-kind doesn’t mean that the properties must be the same type, the same quality, or even in the same state. It means that both properties must be owned for business or investment purposes only. So you could sell an apartment building and invest the proceeds in a warehouse, shopping center, or even a vacant lot.
Benefits of a 1031 Exchange
The key incentive, of course, is the deferral of capital gains taxes. But a 1031 Exchange also allows you to swap one property for another in a different part of the country or one that has a greater opportunity to appreciate. Maintaining an investment in real estate allows it to continue growing tax-sheltered and build wealth over time.
Discover additional details of real estate investing with the CRE Income Fund 1031 Exchanges.
Paired with the Historical Growth of the Industrial Sector, CRE Income Fund 1031 Exchanges Offer a Unique Investment Opportunity
Benefits of Deferred Taxation: Exchange vs. Non-Exchange
Reinvest deferred taxation
| Scenario | Sells Property & Pays Taxes | Completes 1031 Exchange & Defers Taxes |
|---|---|---|
| Purchase Price | $1,000,000 | $1,000,000 |
| Depreciation | $300,000 | $300,000 |
| Adjusted Cost Basis | $700,000 | $700,000 |
| Sale Price | $2,000,000 | $2,000,000 |
| Total Taxable Gain | $1,300,000 | $1,300,000 |
| State Tax (13.3%) | $199,500 | $0 |
| Federal Long Term Capital Gain (20%) | $260,000 | $0 |
| Net Investment Income Tax (3.8%) | $68,400 | $0 |
| Depreciation Recapture (25%) | $75,000 | $0 |
| Total Taxes Due | $602,900 | $0 |
| Net Proceeds for Investment | $1,397,100 | $2,000,000 |
Key Benefits of Completing a 1031 Exchange
Significant Tax Savings
Deferring taxes allows you to reinvest more capital. For example, selling a $2 million property and paying taxes results in $602,900 in taxes, leaving $1,397,100 to reinvest. Completing a 1031 Exchange defers taxes, allowing you to reinvest the full $2 million.
Boosted Returns
On average, investors boost returns by $127,500 or 15.4%, enjoying up to 30% in tax savings. For example, a $1 million property could see tax savings of approximately $318,000.
Enhanced Portfolio Growth
Reinvesting the full proceeds helps grow your portfolio faster, taking advantage of compounded returns and diversification.
- A 1031 Exchange is not a short-term investment. Each DST has a full cycle from the time properties are acquired to when they’re sold. After the properties are sold, investors receive a return of their principal and a share of the appreciation of the properties. At that point, investors can cash out and pay the tax bill or do another 1031 Exchange.
- DSTs are open only to accredited investors, which include certain investment professionals or individuals with more than $200,000 in annual income ($300,000 if married) or a net worth of more than $1 million (excluding the primary residence).
- The minimum investment in our 1031 Exchange / DST is far lower than purchasing a property on your own. For example, CRE Income Fund’s new 1031/DST has a minimum investment of $100,000 for individuals that carry debt on their existing property and only $25,000 for individuals that carry no debt (cash accounts).
Take the Next Step with CRE Income Fund
See how easy it is to start investing in a DST through the CRE Income Fund. We will guide you through the entire process, ensuring that you maximize your returns and grow your wealth tax-efficiently. Make your next move your best move with a 1031 Exchange and CRE Income Fund. See how easy it is to start investing in a DST through the CRE Income Fund.