What Is a 1031 Exchange—and Should You Consider One?

What are the basics of a 1031 Exchange, and how do you actually do one?

A 1031 Exchange lets you defer capital gains taxes when selling investment property—so long as you reinvest the proceeds into another "like-kind" property. It's a savvy move for real estate investors looking to grow wealth while minimizing tax liabilities.

The Basics of a 1031 Exchange

Here’s the short version: A 1031 Exchange (named after Section 1031 of the IRS Code) allows you to sell one investment property and purchase another—without immediately paying capital gains taxes. This only applies to real estate held for investment or business purposes, not primary residences.

Key requirements include:

• The properties must be “like-kind” (think real estate for real estate, not a condo for a yacht).

• You have 45 days to identify a replacement property.

• You must close within 180 days of the original sale.

• Funds must be held by a qualified intermediary—not you.

Why Do Investors Use It?

The benefits are big:

• Tax deferral frees up more capital to reinvest.

• Portfolio flexibility lets you diversify or consolidate holdings.

• Estate planning perks mean your heirs may inherit property with a stepped-up basis, potentially avoiding deferred taxes altogether.

How to Do a 1031 Exchange (Without Losing Sleep)

The process might sound intimidating, but it’s entirely doable—especially with the right team in place.

You’ll need:

1. A qualified intermediary to handle the funds

2. A trusted real estate advisor (hi, that’s me!)

3. A plan to meet IRS deadlines without surprises

Whether you're trading up to a larger multifamily or shifting to a new market, I can help you align your goals with the right strategy.

Final Thoughts

1031 Exchanges aren’t just for seasoned pros—they’re a smart tool for any investor looking to grow their portfolio efficiently.
If you're curious whether this move makes sense for you, don't navigate it alone. Reach out to a knowledgeable advisor who knows the nuances of the North Shore market - ME!

Let’s talk about how a 1031 Exchange could work for your next move.