1031 Exchange Basics

Understanding the Fundamentals

A 1031 exchange is one of the most powerful tools available to real estate investors, allowing you to defer capital gains taxes when selling an investment property and reinvesting in another. This strategy enables you to preserve more of your capital, build wealth, and expand your real estate portfolio without the immediate tax burden.

We simplify the exchange process, ensuring you stay compliant with IRS regulations while maximizing your investment potential.

What Is a 1031 Exchange?

A 1031 exchange, named after Section 1031 of the Internal Revenue Code, allows investors to sell one investment property and purchase another of equal or greater value without paying immediate capital gains tax. Instead of cashing out and triggering a taxable event, your proceeds are transferred to a Qualified Intermediary (QI)—like us—who holds the funds until you acquire a replacement property.

By deferring taxes, you can reinvest 100% of your proceeds, giving you more purchasing power for your next investment.

How a 1031 Exchange Works

Plan Your Exchange

Before selling your property, consult with a 1031 exchange expert to ensure your transaction is properly structured.

Sell Your Property

Once your property sells, the proceeds are transferred to a Qualified Intermediary—not directly to you—to maintain compliance with IRS rules.

Identify a Replacement Property

Within 45 days of selling your original property, you must identify one or more potential replacement properties in writing.

Purchase the Replacement Property

You have 180 days from the sale of your original property to close on the new property using the proceeds held by your QI.

Complete the Exchange & Defer Taxes

By following IRS rules and deadlines, you successfully defer capital gains tax and reinvest in a new property without losing money to taxes.

Key 1031 Exchange Rules & Requirements

Like-Kind Requirement
– The replacement property must be of the same nature (investment or business use real estate).
45-Day Identification Rule
– You must identify potential replacement properties within 45 days of selling your original property.
180-Day Exchange Rule
– You must close on the new property within 180 days of selling your original property.
Qualified Intermediary (QI) Requirement
– Funds must be held by a third-party intermediary to ensure IRS compliance.
Equal or Greater Value Rule
– To defer all taxes, the new property must be of equal or greater value than the one sold.

Types of 1031 Exchanges

1

Forward Exchange (Traditional 1031 Exchange) – Sell your property first, then purchase the replacement property within the IRS deadlines.
2

Reverse Exchange – Acquire the replacement property before selling the existing one for greater flexibility.
3

Build-to-Suit (Construction Exchange) – Use exchange proceeds to improve or build on the replacement property.
4

Delayed Exchange – The most common type, where funds are held by a Qualified Intermediary while you find a replacement.
5

Simultaneous Exchange – The sale of the relinquished property and purchase of the replacement occur on the same day.

Benefits of a 1031 Exchange

A 1031 exchange allows real estate investors to defer capital gains taxes, keeping more money working for them instead of paying it to the IRS. By reinvesting 100% of the proceeds, investors gain more buying power, making it easier to upgrade to a larger or better-performing property.

This strategy also helps with portfolio growth and diversification, allowing investors to explore new markets, property types, or higher-value assets. Additionally, a 1031 exchange offers estate planning benefits, reducing tax burdens for heirs while enabling long-term wealth accumulation without IRS penalties.

Common 1031 Exchange Mistakes to Avoid

Missing IRS Deadlines – The 45-day and 180-day rules are strict.
Touching the Sale Proceeds – If you take possession of the funds, you’ll owe taxes.
Choosing an Unqualified Intermediary – A trusted QI ensures compliance and security.
Failing to Meet the Like-Kind Rule – Make sure your replacement property qualifies under IRS guidelines.
Not Reinvesting Enough – If you buy a lower-value property, you may owe partial capital gains tax.

Why Choose 1031 Exchange Network?

No-Fee Exchanges – Keep more of your money—$0 upfront fees and interest-bearing accounts.
Security & Compliance – Funds held in segregated FDIC-insured accounts for ultimate safety.
Available 7 Days a Week – Get expert guidance when you need it, from 8 AM–Midnight (EST).
50+ Years of Expertise – Attorneys, CPAs, and exchange specialists guiding every transaction.
Nationwide Service – We facilitate 1031 exchanges across all 50 states.

Get Started with a 1031 Exchange Today

The 1031 exchange process doesn’t have to be complicated—especially when you have the right partner. We make it seamless, secure, and fee-free so you can focus on growing your real estate investments.

Start Your Exchange Schedule a Free Consultation