Are 1031 Exchanges only for Big Investors?

1031 exchange investor

Are 1031 exchanges only for big time investors that have lots and lots of net proceeds? The quick answer to this question is no. In this article, we will examine a few of the ways in which any investor – large or small – can benefit from a 1031 exchange.

Small Investors & 1031s

It’s a common myth that 1031 exchanges are only for the largest investors. But small mom-and-pop investors can avail themselves of the same tax deferral that the big boys do.

Whether you're selling a $43,000 single family rental in Akron Ohio or selling the Trump Plaza in New York City the same principle applies. If you want to take your hard-earned equity and redeploy it into another replacement property that's like kind so that you can use that money to compound and build your own wealth, you can do so. Even little guys can avail themselves of substantial tax savings and grow and compound their wealth until they're no longer little guys and are now successful real estate entrepreneurs.

Determining Your Gain

Your gain is determined by the difference between your current adjusted basis and the net sale price (amount realized), so even if you do not receive very much cash proceeds, it can still make good sense to set-up your sale as a 1031 exchange.  If you estimated a combined state and federal rate of 33%, even if you can defer the recognition of $50,000.00 of gain, that may result in a tax savings of $16,500.00.  So, even small investors can save BIG with IRC Section 1031 Like-Kind Exchanges.

  • 1031 Hotline: If you have questions about 1031 exchanges and investing in real estate, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.


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