1031 Exchanges are for Investment Property
The term "1031" comes from the IRS tax code that allows investors to defer capital gains by exchanging like-kind property. A 1031 exchange cannot be used for residential property as a primary address.
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Examples of like-kind properties are:
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Exchanging an apartment building for a duplex;
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Exchanging a commercial building for a residential investment property;
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Exchanging a business property for a vacation property.
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You can exchange multiple properties, and buy just one property, as long as the total value of the replacement(s) are of equal or greater value.
More About 1031 Exchanges
Once you sell the property you wish to exchange, the proceeds should be transferred to a Qualified Intermediary until a replacement property is located.
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You have 45 days from the date of the sale of your property, to indentify it's replacement.
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The replacement property must close within 180 days of selling your previous property.
1031 exchanges are a great way to change property types, relocate to other markets, consolidate multiple lower cash flow investments for upgraded property, and reduce management obligations.
