1031 EXCHANGE
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1031 ESCHANGE SERVICES THAT PUT YOUR PORTFOLIO IN MOTION.
What Is a 1031 Exchange?
A 1031 Exchange (named after Section 1031 of the Internal Revenue Code) allows real estate investors to defer paying capital gains taxes when they sell one investment property and reinvest the proceeds into another “like-kind” property.
This tax deferral strategy is widely used to build wealth, increase cash flow, and upgrade or diversify real estate portfolios without reducing your equity through taxes.
Basic Qualifications for a 1031 Exchange
To qualify, the transaction must meet the following IRS requirements:
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Properties Must Be "Like-Kind"
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Both properties must be held for investment or business purposes.
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A rental home can be exchanged for a commercial building, land, or another rental — as long as both are like-kind (used for investment/business).
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Both Properties Must Be in the U.S.
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Foreign property is not eligible for 1031 exchange with U.S. property.
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You Must Use a Qualified Intermediary (QI)
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You cannot hold or touch the proceeds from the sale.
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A Qualified Intermediary must hold the funds during the exchange and transfer them directly to the replacement property.
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The 1031 Exchange Process
(Step-by-Step)
1. Sell the Relinquished Property
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You list and sell your investment property just like any normal transaction.
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At closing, the Qualified Intermediary receives the sale proceeds (not you).
2. Identify Replacement Property Within 45 Days
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You have 45 calendar days from the closing date of the sale to identify potential replacement properties in writing.
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You must submit the identification list to the QI.
Identification Rules:
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3 Property Rule: Identify up to 3 properties of any value.
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200% Rule: Identify any number of properties as long as the combined value doesn’t exceed 200% of the relinquished property.
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95% Rule: You can identify more than 3 properties if you end up purchasing at least 95% of the total value identified.
3. Close on Replacement Property Within 180 Days
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You must close on the replacement property within 180 calendar days from the sale of the original property (or by the due date of your tax return — whichever is earlier).
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This includes the 45-day identification period.
4. Complete the Exchange
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The QI uses the held funds to purchase the new property on your behalf.
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Once closed, the exchange is complete and your capital gains tax is deferred.
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Like-Kind Property:
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Real estate for real estate, as long as both are for investment or business use.
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Primary residences, fix-and-flips, and personal-use properties do not qualify.
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Title Must Match:
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The entity that sells the original property must be the same entity buying the replacement property (e.g., individual, LLC, trust, etc.).
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Use of All Proceeds:
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To fully defer taxes, you must reinvest all the proceeds and acquire a property equal to or greater in value.
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Boot (Partial Exchanges):
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If you take cash or reduce your mortgage balance, that portion (called “boot”) may be taxable.
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Timeframes Are Strict:
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The 45-day identification and 180-day closing windows are firm — missing either disqualifies the exchange.
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One Exchange per Property:
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Once a property is exchanged under 1031, you cannot immediately use it for personal use. Typically, the IRS expects it to be held as an investment for at least 2 years.
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Common Mistakes to Avoid
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Missing the 45-day or 180-day deadlines
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Taking possession of the funds yourself
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Misidentifying non-like-kind properties
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Not using a qualified intermediary
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Attempting to exchange personal-use property
Benefits of a 1031 Exchange
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Defer Capital Gains Taxes (potentially indefinitely)
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Preserve Equity for reinvestment
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Leverage into Larger or Better Properties
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Consolidate or Diversify Portfolios
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Strategically Relocate Investments
Final Thoughts
A 1031 Exchange is a powerful tax-deferral strategy — but the rules are strict, and mistakes can be costly. Working with experienced professionals like a Qualified Intermediary, tax advisor, real estate broker, and transaction coordinator ensures your exchange stays compliant, smooth, and beneficial.
Our Services
A Smarter Way to Buy & Sell Investment Properties
At Real on Rise Capital Inc., we specialize in creating strategic connections between motivated sellers and serious 1031 exchange investors looking to reinvest capital gains and defer taxes under tight IRS deadlines. In today’s market, many owners of ballooning or distressed properties may be facing pressure to sell quickly. These properties are often priced below market value due to loan maturity issues, rising rates, or other financial constraints.
This creates a win-win opportunity:
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Sellers can exit fast with fair-market offers — avoiding further financial stress or foreclosure risk.
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1031 buyers get access to investment-ready properties just when they need them most — with the ability to close quickly and satisfy IRS timelines.
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We facilitate these transactions ethically and professionally, with a focus on:
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Respecting seller timelines and needs
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Helping 1031 buyers meet exchange deadlines
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Delivering smooth, compliant closings
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Preserving value for both parties
Whether the sale is off-market or publicly listed, our role is to ensure both sides walk away with a transaction that aligns with their financial goals — not just a quick sale, but a smart, strategic move for everyone involved.
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