A Tool for Building Generational Wealth

Real estate has long been one of the most reliable vehicles for building long term wealth. For investors looking to preserve capital, scale their portfolios, and plan beyond a single generation, the 1031 Exchange remains one of the most powerful tools available.

At its core, a 1031 Exchange allows you to reinvest the proceeds from the sale of an investment property into another qualifying property without immediately paying capital gains taxes. By deferring those taxes, more of your equity stays invested and continues working for you instead of going to the IRS.

What Is a 1031 Exchange?

A 1031 Exchange, named after Section 1031 of the Internal Revenue Code, allows investors to sell an investment or business use property and acquire another like kind property while deferring capital gains and depreciation recapture taxes.

Rather than reducing your proceeds through taxation, a properly structured exchange keeps your equity intact and allows you to reposition your portfolio strategically.

To qualify, both the property being sold and the replacement property must be held for investment or business purposes. The IRS requires replacement properties to be identified within forty five days of the sale and the exchange to be completed within one hundred eighty days. A Qualified Intermediary must also be used to hold the proceeds during the exchange.

When executed correctly, a 1031 Exchange can be an effective way to improve performance, reduce management burden, or diversify holdings without triggering an immediate tax event.

Why Investors Use the 1031 Exchange

Tax Deferral
Capital gains and depreciation recapture taxes can be deferred by reinvesting proceeds into another investment property, allowing more capital to remain deployed.

Portfolio Growth
Untaxed equity can be used to trade into higher performing or more strategic assets, increasing income and long term value.

Diversification
Investors can reallocate capital across different markets, asset types, or tenant profiles without creating a taxable sale.

Generational Planning
When properties are passed to heirs, they typically receive a step up in basis, which can eliminate the deferred tax entirely and preserve wealth for the next generation.

Key Requirements to Know

Exchange Timeline
Replacement properties must be identified within forty five days of closing the sale. The acquisition must be completed within one hundred eighty days.

Like Kind Property Rules
Both properties must be held for investment or business use. Like kind refers to the nature of the property rather than the specific asset type. Retail, industrial, office, medical, and net lease properties may all qualify.

Qualified Intermediary
Exchange funds must be held by a third party intermediary. The seller may not take possession of the proceeds at any point during the transaction.

Failure to meet any of these requirements can disqualify the exchange, making proper planning essential.

How JLE Real Estate Helps

At JLE Real Estate, our focus is on making the 1031 Exchange process clear, strategic, and execution driven. Every step is aligned with your long term investment objectives.

We assist with pre sale planning and exchange strategy, identifying high quality replacement opportunities nationwide, coordinating with Qualified Intermediaries, CPAs, and legal counsel, and managing timelines and documentation to ensure IRS compliance.

Our goal is to help you preserve capital, improve asset quality, and build lasting wealth with clarity and confidence.