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What is a 1031 Exchange

A tax-deferred exchange under Section 1031 of the Internal Revenue Code is a method that allows you to sell an investment property and acquire another like-kind property while deferring state and federal capital gains taxes until later.


You can then reinvest your sale proceeds that would otherwise be paid to the government as capital gains taxes. Administered correctly, a 1031 exchange can be a powerful tool allowing you to sell and buy like-kind property to defer capital gains tax. And because it’s an IRS-sanctioned tax deferral opportunity, its rules are widespread, and it comes with myriad do’s and don’ts.


Do’s of a 1031 Exchange


DO employ a qualified intermediary (QI) prior to the close of your exchange. The IRS requires you to use a QI throughout the process. You can consult with your CPA or your attorney, but they will not be able to handle the exchange. Only a QI can do that.


DO contact us for a QI recommendation if you’re not sure where to start.


DO reinvest in a like-kind property. Read more here about the replacement property.


DO use all the proceeds from the sold property to purchase the replacement property


DO ensure the debt on the new property is greater to our equal to the debt on the sold property.


DO have a cooperation clause written into the agreement so the buyer is aware you are entering a 1031 exchange.


Don’ts of a 1031 Exchange


DON’T dissolve a partnership or change a holding title once the exchange process has begun. Such a change could jeopardize the exchange.


DON’T ignore the 45-day identification period. This is a strict period of time you have to identify the replacement property. Visit our website to see a list of available properties.


DON’T ignore the 180-day closing period. Closing must occur within 180 days of closing on the relinquished property or by your tax return due date.


DON’T look for like-kind property outside the United States. Foreign investments are not eligible for a 1031 exchange.


DON’T file your taxes for the year until you’ve completed your exchange.


DON’T fret! Diversified Investment Strategies represents a team of experts who have handled hundreds of exchanges. We can help you from the minute you decide to sell your property and advise along the way. Contact us for a no-pressure consultation, so we can educate you on all your available options.


Diversified Investment Strategies represents a team of experienced and trusted professionals specializing in real estate investment and services – including buying, selling, leasing, retirement planning and wealth growth and management through strategic, informed investment choices and a meticulous real estate investment analysis. As knowledgeable replacement property professionals, they help clients build a customized strategy that identifies suitable investments pursuing successful completion of a 1031 Tax-Deferred Exchange. Visit them at or call 949-635-7192.


There are material risks associated with investing in DST properties and real estate securities including liquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal. Past performance is not a guarantee of future results.  Potential cash flow, returns and appreciation are not guaranteed. IRC Section 1031 is a complex tax concept; consult your legal or tax professional regarding the specifics of your particular situation. This is not a solicitation or an offer to sell any securities. DST 1031 properties are only available to accredited investors (typically have a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last three years) and accredited entities only. If you are unsure if you are an accredited investor and/or an accredited entity please verify with your CPA and Attorney.


Diversified 1031 does not offer legal or tax advice. Please consult the appropriate professional regarding your individual circumstance.


Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Diversified 1031 is independent of CIS.