Reasons to do a 1031 Exchange

A real estate investor should review their portfolio regularly with their tax and real estate professional to analyze current market conditions and tax ramifications. After such an analysis, the taxpayer may decide to sell a property or two and do a 1031 Exchange. Some of the reasons for that may be…


A taxpayer may discover that the appreciation of a property has maxed out due to the type of property or location. It may make sense to liquidate said property and purchase a new one, in the same area or maybe in another state where appreciation is outpacing your current location.


The taxpayer may have owned this property for a number of years and have taken all the depreciation available on the property. By doing an exchange into a larger property, you can possibly regain some of that depreciation for future use.


After thorough analysis, the taxpayer may decide they would like to diversify their investments and not have all in single-family homes, or in retail. By consulting with their real estate professional, a decision could be made that by diversifying, they can gain more income or appreciation. Many taxpayers just wait until market conditions change. Instead, the taxpayer should blaze their own trail and maximize on the market.

Cash flow

Taxpayers are always looking at cash flow from their investment properties. This is a regular process and may be a reason to liquidate and purchase new property.

In all of these situations, the 1031 Exchange can assist in deferring gain from the sale of property as long as the taxpayer follows the rules of the 1031. The valuable tax benefits of a 1031 Exchange should always be considered before selling investment property.

For additional information, please reach out to your tax professional or contact the specialists here at Security 1st Exchange for assistance.