CalculateRealEstateROI

Investing

How does a 1031 exchange work?

Sell investment real estate and roll proceeds into a like-kind property within 45 days to identify and 180 days to close, deferring all capital gains and depreciation recapture.

Reviewed by Keiron Brown, Founder & Editor, CalculateRealEstateROI · Educational estimates only — not investment, financial, tax, or legal advice

Direct answer

Sell investment real estate and roll proceeds into a like-kind property within 45 days to identify and 180 days to close, deferring all capital gains and depreciation recapture.

Expanded explanation

Use a Qualified Intermediary (QI) — you cannot touch the funds personally. Replacement property must be equal or greater in value and debt. The clock starts on the sale closing date, not the listing date. Failed 1031s become taxable. Reverse and improvement exchanges add flexibility but require advanced planning.

Examples

  • $500k sale → identify 3 replacement properties by day 45 → close by day 180.

More Investing questions