what are the benefits?

Defer Capital Gains and Other Taxes

Allows you to sell an investment property and re-invest 100% of the net equity into a like-kind replacement property while deferring your capital gains and other taxes! 

If you sell a property and do not perform a 1031 Exchange, you will typically give up 20-35% in taxes including federal capital gains, depreciation recapture, state capital gains (varies by state), and net investment income tax (varies by investor).

"Trade up"

If your existing property has appreciated significantly, you can sell it and leverage the power of a 1031 Exchange to “trade up” to a larger or more profitable property. For example, we recently helped a client from Oakland who sold a single rental condo and exchanged up to a 4-plex in Mesa, AZ! 


An investor may sell several smaller properties and exchange into one larger property for ease of ownership and management.

Non-Tax Benefits

There are other non-tax reasons for exchanging such as increasing cash flow, reducing operating expenses, increasing net worth, reducing risk, relocating to new markets, or diversifying your real estate assets - all while not losing any equity to taxes!


How does it work?

A properly structured exchange allows an investor to sell one or more appreciated assets (in our case rental or investment real estate) and defer the payment of taxes by acquiring one or more like-kind replacement properties.

Delayed Exchange

The info-graphic below breaks down the basic process and timeline for what’s known as a Delayed Exchange, which is the most common form of exchange used in real estate transactions. It is called a Delayed Exchange because the the exchanger sells their Relinquished Property on one date, and then acquires the Replacement Property at a later date


 Note- The 45 day identification period runs concurrently with the 180 day purchase requirement!

(e.g., if you use all 45 days to identity your properties, then you will have 135 days remaining to close)

Also note that these are calendar days, so weekends and holidays count!


 Disclaimer: This page has been written as a concise overview/introduction to 1031 Exchanges and is meant for educational purposes only and should not be considered tax or legal advice. You should always consult with your own legal, tax, and financial advisers, as well as a licensed Real Estate Agent and Qualified Intermediary, to determine if a tax deferral strategy such as a 1031 Exchange is suitable for your specific circumstances.