The IRS has long understood that an investment of some sort that changes form but not substance does not change the state of the investor. In Real Estate this is governed under the 1031 rules.

If you sell an investment property and quickly change that into another "like" investment property without actually having your hands on the money while the properties are sold and purchased, then you will not have to pay capital gains or income taxes (as appropriate) on the gains from the sale of the first property and instead roll them into the second property. This defers the date when you have to pay taxes on your gains and helps you make your gains to date work for you in the investment property you roll the gains in to. Also keep in mind that the sale and purchase must be completed within a fairly tight timeline (generally 180 days).

But how do you sell and buy property without actually touching the proceeds of the sale of the first property? That is where a 1031 transfer agent comes in. This is an independent 3rd party who actually handles the money on your behalf and ensures that none of the proceeds from the sale of the first property are redirected and instead are reinvested in the purchased property.

We help clients do 1031 exchanges all the time. We work with 1031 transfer agents and can assist you in finding the one that's right for you.

If you have investment property that for whatever reason is no longer fitting your long term goals, let us help you find a new situation that works better. Call me today!