After ten or more years of owning a property, the amount of depreciation being generated by a property can be pretty meager, providing little in the way of tax savings. However, with an exchange, the one can leverage the built-up equity to acquire a more upscale property that will start a new depreciation schedule on a much larger sum—essentially restoring the tax benefits enjoyed early on in an ownership career.
By moving up in the scale and type of property, an investor can realize a variety of benefits: a newer, more active property, higher cash flow, indefinite postponement of capital gains taxes, an improved growth opportunity, more tax savings due to a renewed depreciation schedule, and relief from the drudgery of management. Investor work for many years to build your financial base. With 1031 exchanges, they have the opportunity to reap the rewards of that work and to maximize the benefits.