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What is a 1031 Exchange?

A tax-deferral strategy that keeps your capital working instead of going to the IRS

A 1031 exchange, named after Section 1031 of the Internal Revenue Code, allows real estate investors to defer capital gains taxes when selling an investment property by reinvesting the proceeds into a “like-kind” replacement property.

Instead of losing 20-30% of your gains to federal and state taxes, you keep that capital invested and working for you.

How It Works

Sell Your Property

List and sell your investment property. The proceeds go directly to a Qualified Intermediary (QI), not to you.

Identify Replacement

Within 45 days, identify up to three potential replacement properties in writing to your QI.

Close the Exchange

Within 180 days of your original sale, close on your replacement property. The QI transfers funds directly.

Defer Your Taxes

Capital gains taxes are deferred. You can repeat this process indefinitely, building wealth tax-efficiently.

The Critical Deadlines

45 Days

Identification Period

You must identify potential replacement properties in writing within 45 calendar days of selling your property. This deadline is strict and cannot be extended.

180 Days

Exchange Period

You must close on your replacement property within 180 calendar days of your original sale. Miss this deadline and the entire exchange fails.

Replacement Property Options

Direct Ownership

Purchase another investment property directly. You remain the landlord, responsible for management, maintenance, and tenant issues. Full control, but also full responsibility.

Delaware Statutory Trust (DST)

Own a fractional interest in institutional-quality real estate. Professional management, no landlord duties, monthly income. Ideal for passive investors or those with smaller exchange amounts.

Tenants-in-Common (TIC)

Co-own a property with other investors, each holding a deed. More flexibility than DSTs, but limited to 35 co-owners. Often used for larger properties or custom arrangements.

Common Mistakes to Avoid

Taking constructive receipt of funds

If sale proceeds touch your account, even briefly, the exchange fails. Always use a Qualified Intermediary.

Missing the 45-day identification deadline

This deadline cannot be extended for any reason. Start identifying replacement properties before you sell.

Rushing into a bad replacement property

The time pressure leads many investors to take deals that defer taxes but don't make investment sense. Don't trade a tax problem for an investment problem.

Not understanding the fee structure

Some DSTs and replacement options come loaded with fees. Know what you're paying before you commit.

Is a 1031 Exchange Right for You?

Not every situation calls for a 1031. Let us help you evaluate your options.

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Everything you need to know before you sell. Timelines, requirements, and questions to ask.

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