Whats a 1031 tax-free exchange?
In a nutshell, 1031 Exchanges are a way to keep your property dollars going without having to pay a tax on them as they grow. You sell a property, put the funds into the hands of a designated third party who “holds” those funds until you identify your “exchange” property or properties (you have the option to split the funds into more than one property, which can be very useful). There is a time limit of 45 days for this, which can be a downside. When you are ready to make the purchase, the designated third party deposits your sale funds into your purchase escrow and the purchase takes place without having had to pay a capital gains tax.
