What is a 1031 Exchange? For New Real Estate Agents & Investors

Jul 8, 2025 | 1031 Exchange, Featured

A 1031 Exchange allows real estate investors to sell a property and buy (exchange) another property without paying capital gains taxes. In this way, it is similar to a 401k rollover but with its own set of strict rules and procedures. This tax deferral strategy has four key rules. Let’s take a look:

1031 Exchange

By Hayley Baldinelli, J.D.

Table of Contents

4 Key Rules of a 1031 Exchange

  1. Like-Kind: The property that you buy to replace the one you are selling must be an investment. So, as an example, you cannot sell your short term rental on Siesta Key and buy a house in Arlington Park to live in. Well, you could, but you would not be able to use the tax advantages provided within a 1031 Exchange.
  2. Equal or Greater Value: Simply put, the property you are buying must be the same price or higher price as the property you are looking to sell.
  3. No Cash Out or “Boot”: You cannot pull any money out of the transaction. All money must be reinvested into the property you are purchasing.
  4. Strict Deadlines: Once you close on the relinquished property, you will have 45 days to identify a replacement (property to purchase), and 180 days to close. Pro tip: Start looking for a replacement before you close on your first property.

Types of 1031 Exchanges

  1. Delayed: This is the most common type. Essentially it means, sell first, then buy.
  2. Reverse: Yup you guessed it. Buy first, then sell. This is less common and has strict rules.
  3. Construction: Build on the replacement property. And hurry, because it will need to be finished within 180 days!
  4. Simultaneous: If you are an experienced investor, you already know there are many moving parts to a real estate transaction. For this reason, a simultaneous exchange can be tricky. Make sure you are using a reputable Qualified Intermediary

1031 Exchange Critical Dates

1031 Exchange Deadlines

How to Get Started

So now that you know the basics, you are probably wondering how to get started with the process. Here are a few things you can do:

  1. Learn what needs to go in your contract. For example, the contract for the sale of your property should specify that the property is being sold as part of an IRC Sect. 1031 exchange. Also, your contract on the replacement property should include similar language. An experienced real estate attorney can help you write this language. Preferred Settlement Services can provide this service.
  2. Choose a qualified intermediary, like Old Republic Title. (While Old Republic Title can act as your intermediary, you will still need to choose an attorney or title company for your closing.)
  3. Review more information on the process HERE.

If you have questions about the 1031 Exchange process in Florida, contact our main office at (941) 376-9551