A Strategy Real Estate Investors Should Know
If you own investment real estate, there’s a strategy that can make a meaningful difference when it comes time to sell.
It’s called a 1031 Exchange.
For many investors, selling a property can trigger significant capital gains taxes. A 1031 exchange provides an opportunity to defer those taxes by reinvesting the proceeds into another investment property, allowing investors to keep more of their equity working for them.
When used strategically, this tool can help investors:
Move from smaller properties into larger assets
Consolidate or diversify their portfolio
Preserve equity that would otherwise go to taxes
Rather than losing a portion of their gains to taxes immediately, investors can reinvest those funds into new opportunities and continue building their real estate portfolio.
Timing Is Critical
One of the most important aspects of a 1031 exchange is the timeline.
After selling an investment property, investors have 45 days to identify potential replacement properties and 180 days to complete the purchase of the new property.
These deadlines are strict and leave little room for delays. Because of this, it’s important to begin planning before listing a property for sale, not after a deal is already underway.
Working with experienced professionals early in the process can help ensure the exchange is structured correctly from the start.
Investment Property for Investment Property
Another key detail is that 1031 exchanges apply only to investment or business property. They cannot be used when selling a primary residence.
However, there is flexibility in what types of properties can be exchanged. Investors may move between different types of real estate, including:
Residential rental properties
Commercial buildings
Land
Investment properties in different states
This flexibility allows investors to reposition their portfolios as markets, strategies, and opportunities evolve.
A Tool for Long-Term Real Estate Strategy
For many property owners, a 1031 exchange becomes part of a broader long-term strategy. It allows investors to transition from one asset to another while preserving more of the equity they’ve built.
If you’re considering selling investment real estate, understanding how a 1031 exchange works before you sell can make a meaningful difference in the outcome of your next move.
Planning ahead is often the key to turning a property sale into the next step in building a stronger real estate portfolio.
Watch the full conversation as Asher and his guest, Sheila Long, 1031 expert, break it down on the latest episode of The Real Deal Podcast.
