What is a 1031 exchange?

A 1031 exchange is a tax-deferment strategy often used by real estate investors. In this process, the owner of an investment property (or multiple) sells their original property and buys a like-kind property as a replacement. By following the IRS’s rules during this procedure, they defer capital gains tax.

What are the rules & regulations of a 1031 exchange?

Let’s discuss the rules and regulations of a 1031 exchange, including property and time requirements. The property you exchange must meet certain requirements: The replacement property must be “like-kind” to the relinquished property or of equal or greater value. For two properties to qualify as “like-kind,” they must be similar enough.

Can a 1031 exchange help you grow your real estate investment portfolio?

Investors can grow their real estate investment portfolios faster by taking advantage of a 1031 exchange. Instead of paying taxes on their proceeds, they keep all their money and reinvest it into a new property. Let’s say the value of an investor’s rental property has grown, and they want to reinvest in another property.