A 1031 exchange gets its name from Section 1031 of the U.S. Internal Revenue Code, which allows you to avoid paying capital gains taxes when you sell an investment property and reinvest the proceeds from the sale within certain time limits in a property or properties of like kind and equal or greater value.

Is it smart to do a 1031 exchange?

The 1031 exchange allows equity from one real estate investment to roll into another, while deferring capital gains taxes. And it's often one of the best methods for building wealth over time. ... If he had exchanged and rolled his equity a few times, his equity today would likely be worth $4 million instead of $2 million.

Can anyone do a 1031 exchange?

This means that any real property held for investment purposes can qualify for 1031 treatment, such as an apartment building, a vacant lot, a commercial building, or even a single-family residence. ... Some personal property may qualify for a 1031 exchange too.