Real Estate Investment Strategies

Reposition Your Portfolio With a 1031 Exchange

Selling an investment property can raise important tax and portfolio questions. Learn how a 1031 exchange may help eligible investors reinvest in other qualifying real property.

Explore the 1031 Exchange Basics
Investment property representing a possible replacement property in a 1031 exchange
A Starting Point for Investors

What Is a 1031 Exchange?

A 1031 exchange is a tax-deferred strategy that may allow an investor to exchange qualifying real property held for investment or business use for other qualifying real property. When the requirements are met, eligible gain may be deferred rather than recognized at the time of the exchange.

Investors may consider an exchange when they want to change property type, move to a different market, pursue different income potential, or reduce the hands-on demands of a particular property.

A 1031 exchange generally defers tax; it does not automatically erase tax. Eligibility and results depend on the transaction and the investor’s circumstances.
Discuss Your Property Goals
More Than a Tax Strategy

Why Investors Consider Repositioning

An exchange can be an opportunity to reassess whether a property still fits your goals. Investors often look at the full picture: cash flow, condition, management needs, location, and future plans.

01

Trade Up in Property Size

Some investors explore moving from a smaller property, such as a duplex, into a larger multifamily property.

02

Reconsider the Market

An exchange may give an investor a chance to evaluate a different area, local rental conditions, and long-term market fit.

03

Address Property Challenges

Older systems, upcoming repairs, difficult management demands, or changing income may prompt an owner to review other options.

04

Align With New Goals

Your investment priorities can change. Repositioning may help you evaluate properties that better match your current plans.

Multifamily investment property representing a portfolio repositioning example
Ron’s Personal Example

Trading a High-Maintenance Rental for a Duplex

Ron used a 1031 exchange to reposition an older single-family rental. The home, built in the 1960s, had substantial equity but produced about $600 per month in positive cash flow and was approaching major repair needs, including a roof and HVAC system.

He exchanged it for a duplex built in 2007. Each side had three bedrooms, two bathrooms, and a two-car garage. Ron says the move more than doubled his positive cash flow while changing the property’s maintenance profile.

Property exchanged Older single-family rental with major future repairs anticipated
Replacement property Duplex with two 3-bedroom, 2-bath units and two-car garages

Every property and exchange is different. This example describes Ron’s experience and is not a promise of a particular result.

Plan Before You Sell

Key Steps in a Deferred Exchange

Timing and transaction structure matter. Bring in your tax advisor and qualified intermediary early, before transferring the property.

1

Plan the Exchange

Review your goals, property, financing, and potential replacement options with your tax advisor and qualified intermediary before the sale closes.

2

Identify Replacement Property

For a typical deferred exchange, replacement property must be identified within the applicable identification period.

3

Complete the Exchange

Complete the acquisition within the applicable exchange period and coordinate required documents with your qualified intermediary and tax professional.

Important timing note: IRS guidance generally provides a 45-day identification period and requires receipt of replacement property by the earlier of 180 days after transfer or the due date (including extensions) of the tax return for that year. Confirm the deadlines that apply to your transaction with your qualified intermediary and tax advisor.
Before You Decide

Questions to Review With Your Professionals

A 1031 exchange involves tax rules, deadlines, property selection, financing, and transaction costs. Consider the whole investment before deciding whether an exchange fits your plans.

Some investors also discuss long-term estate planning with their tax and legal advisors. Inherited-property basis rules depend on the facts and applicable law, so do not assume a particular tax outcome.

  • Does the property qualify as investment or business real property?
  • Have you spoken with a qualified intermediary before closing?
  • What replacement properties fit your location and management goals?
  • How will financing, repairs, reserves, and transaction costs affect the plan?
  • What could happen if the exchange is delayed or does not qualify?
  • Have your CPA or tax attorney reviewed your specific situation?
Watch Ron Explain the Strategy

Reinvest Smarter With a 1031 Exchange

Hear Ron explain why investors may use an exchange to reposition a portfolio, address property challenges, and pursue new investment goals.

Considering a Change?

Let’s Talk About Your Investment Property

If you are considering selling or repositioning a rental property, Ron can help you review the real estate options and run through the numbers. Speak with your tax and legal professionals about exchange eligibility and tax consequences.

Contact Ron Call or text (916) 730-3846