1031 Exchange Overview

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

This powerful tax deferral strategy has been used by savvy investors for decades to grow their real estate portfolios while keeping more capital working in their investments.

• Both properties must be held for investment or business use

• Properties must be "like-kind" (real property for real property)

• The replacement property must be of equal or greater value

• All proceeds must be reinvested to fully defer taxes

• A Qualified Intermediary must hold the funds during the exchange

45 Days: You must identify potential replacement properties in writing within 45 days of selling your relinquished property.

180 Days: The entire exchange must be completed within 180 days of the sale. This deadline cannot be extended.

Forward Exchange: The most common type. You sell your relinquished property first, then acquire the replacement property within the timeframes.

Reverse Exchange: You acquire the replacement property before selling your relinquished property. Useful when you find the perfect property but haven't sold yet.

Improvement Exchange: Use exchange funds to make improvements on the replacement property. Also known as a construction or build-to-suit exchange.