The Power of a 1031 Exchange

The IRS allows investors to defer paying certain taxes, which can exceed
20-30% of the gains realized, when selling investment real estate by
reinvesting the proceeds into a new property.

Over a lifetime, deferring taxes via a 1031 exchange can dramatically improve the financial results of that lifetime. If a 1031 exchange is utilized, the burden of capital gains and depreciation recapture taxes can be deferred indefinitely, allowing an investor to build wealth through income and appreciation on reinvested capital that otherwise would have been lost to taxes. At death, your beneficiaries can receive a full step-up in basis, effectively eliminating all capital gains taxes that had accrued over the life of the investment. Why pay capital gains taxes to the IRS when you and your family can keep all of that money working for yourselves?

 This model estimates and compares the returns beginning with the sale of a property today, and then 4 consecutive 7 year investments over the next 28 years. The “No 1031” scenario assumes that the owner will pay capital gains taxes after each sale. The “With 1031” scenario assumes that applicable taxes are deferred and reinvested via a 1031 exchange until the death of the investor in 28 years and the total returns include the step up in basis that would be experienced by the beneficiaries. Any estate taxes at death are excluded from this model. For simplicity, this model excludes closing costs and any value-add investments to the real estate over your hold period. Tax on Depreciation Recapture = 25%. Federal Capital Gains Tax = 20%. Medicare Surtax = 3.8%. State/ City Taxes are assumed to be 0%. Land % and Improvements % are assumed to be 20/80 of purchase price, respectively for Residential and Commercial property types. Future hold periods are expected to be 7 years. The depreciation schedule is assumed to be 27.5 years for future investments. The sales price of an asset is assumed to be a price that achieves a 1.5x return on the invested equity in that property. The Purchase price for future investments is assumed to be the available equity plus debt in an amount equal to 70% of the purchase price. The loan is assumed to be non-amortizing. If the input “Current Depreciation Taken” is left blank, a depreciation amount is assumed based on the length of ownership inputted, property type inputted (where Residential is depreciated at 27.5 years, Commercial is depreciated at 39 years, Land is non-depreciable), and the Land/ Improvements splits described above.
Learn more about the assumptions in this section.

When evaluating a 1031 exchange,
there are 5 key things to know:

Concierge 1031 Exchange Placement Services

Galvanized Holdings’ 1031 Concierge Service is designed to help our clients navigate the complicated process of transacting the disposition and acquisition of real estate via a 1031 exchange. Our services include, but are not limited to, the following:


All at no cost to you

      • Providing education on the 1031 Exchange process
      • Assisting with 1031 Exchange management in relation to structuring and timing
      • Understanding your needs as it relates to the exchange to assist in matching you with service providers such as Qualified Intermediaries, Legal Counsel, and Real Estate Sponsors
      • Liaising with and arranging meetings with such service providers and sponsors
      • Sharing industry knowledge with you and providing updates and information on replacement properties
      • We do not simply make introductions and go away… we offer a concierge approach to servicing your 1031 exchange and will be there to represent you through the whole process

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What is a 1031 Exchange?

Whenever you sell business or investment property and you have a gain, you generally have to pay tax on the gain at the time of sale. IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free. To learn more see our white paper.​

Is a 1031 Exchange Right For me?

If you or your clients are selling an investment property or selling a business that owns real estate,
Galvanized Holdings can assist in executing a like-kind 1031 exchange.

For example, did you know that a person doesn’t have to be selling an apartment community to use a 1031 exchange to invest in one? In fact, a person can 1031 exchange a rental home, an office building, a retail center, a working ranch, mineral rights, or even ordinary land into any different type of property.

Simply let us know that you or your client has an upcoming sale and Galvanized Holdings will go to work – from helping you utilize a Qualified Intermediary prior to the sale, to identifying a replacement property that fits your requirements, to referring you legal counsel for your review. Galvanized Holdings offers our investors the ability to maintain their exposure to real estate in a tax-efficient manner, while providing access to diversification and larger, more efficient properties that are professionally managed by seasoned investment firms… No more dealing with tenants, leases, or broken appliances. Galvanized Holdings handles all that and more.

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How do I proceed with a 1031 exchange?

Before you Sell a Property – Let Us Know!

Below is a broad summary timeline of a 1031 Exchange. Once you have decided to sell a property that you held for investment or business use, it is best to begin coordination of your 1031 Exchange. Prior to having a contract with a buyer, we recommend discussing your sale with a Qualified Intermediary “QI” and consulting with any relevant tax or legal experts as to your specific scenario and ownership structure. You need to have all documentation and information in order with your QI prior to selling your current property. When you sell your current property, the QI will directly receive the funds from the closing attorney and hold your funds in escrow until you close on your replacement property. From the date of your property sale, you have 45 days to identify your potential replacement property(ies). During the identification phase, you should conduct your due diligence and place the desired properties under contract. Within 180 days from the sale of your property, you must close on one or all of the desired properties that you have identified. Once you close on the desired property, the QI will transfer your funds to the property seller and your will have effectively completed your 1031 exchange.

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For additional information on how Galvanized Holdings can assist you with your 1031 exchange,

Please email Galvanized Holdings at

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