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How Real Estate Investors Can Benefit from the 1031 Exchange

How to Potentially Defer Capital Gains Tax When You Exchange One Property for Another

A 1031 exchange allows you to sell a property, reinvest the proceeds in a new property, and defer all capital gain taxes. (Source: Internal Revenue Code Section 1031.)

The 1031 exchange is a tax-planning tool to:

* Diversify your portfolio

* Improve your cash flow

* Trade an older property for newer one

* Defer taxes until you’re in a lower bracket

* Shift your investment from one region to another


To qualify for tax deferral, any “like-kind” investment property can be exchanged for any other real property held for investment or real property used in a trade or business. Examples of “like-kind” exchanges include:



Rental Property

Multiple Properties

Commercial Property

Single-Family Homes

Leveraged Properties

Multiple Rental Properties

You can exchange different types of investment property - an apartment building for a shopping mall, for example, or vacant land for an office complex.

To qualify as a like-kind exchange, these rules must apply:

Must be an investment property. The asset being sold must be an investment property and can't be a personal residence.

Must be equal to or greater value. The replacement property must be equal to or greater than the value of your original property. The debt on your replacement property should also be equal or greater than the debt on your relinquished property. You may choose to carry less debt on a replacement property if you add cash from other sources.

Must not be in constructive receipt If you are in “constructive receipt” of all or a portion of the proceeds from the sale of your original property, then the proceeds are taxable and can’t be deferred. Constructive receipt is a tax term meaning you are liable for taxation from income which has not been physically received but has been credited to you.

Must identify property in 45 days. You must identify the property to purchase within 45 days of the sale.

Must buy in 180 days. The proceeds from the sale must be used to purchase the other asset within 180 days of the sale of the first asset.


Lets’ say you sell a property for a $200,000 capital gain, and have a tax liability of a $70,000 for depreciation recapture, and federal and state capital gain taxes. You’ll have $130,000 left to reinvest in another property. Assuming a 25% down payment, you could only buy a different property worth $520,000. However, if you do a 1031 exchange, you’d be able to reinvest the entire $200,000 capital gain toward $800,000 in real estate, assuming the same down payment and loan-to-value ratios.


1. Quantify Replacement Property. The first step: we help you quantify the amount of replacement property you will need to acquire - and how much will come from equity and how much from debt.

2. Confirm Credit. The second step is to confirm that you have the credit ability to obtain the debt to purchase the property.

3. Discuss Timing. The next step is to confirm your interest and suitability for SpringView, and the time requirements to transact the 1031 exchange.

4. Sign NDA. The fourth step is to sign a Non Disclosure (NDA) document to protect the confidentiality of your agreement.

5. Select an Intermediary. The fifth step in the process is to select and involve a qualified intermediary.

6. Select Property. Next: SpringView will help you select the property or properties.

7. Apply for Financing. Then: SpringView will guide you through the financing process.

8. Sign Master Documents. We will then help you understand the asset manager and advisory agreements for your ability to receive a fixed income amount.

9. Sign Documents. You will then sign the Subscription Agreement, Investor Questionnaire, and Operating Agreement of SpringView Investments II.

10. Close the Sale. We then help you close on the sale and acquire the new property or properties.

11. Sign Assignment Agreements. As an optional step, you may sign an assignment agreement to contribute to the ownership of the LLC - or the properties in the future to SpringView Investments II.

For more information on the 1031 exchange, and why you should consider investing in a professionally managed portfolio of single-family homes, please contact Harold Willig at 917-209-4452 or

Harold Willig is the Manager of SpringView Investment Management, LLC, which he founded in 2012. Mr. Willig also served as HFZ Capital Group’s Chief Financial Officer, and was responsible for the oversight of HFZ's Finance and Accounting team. He has over 17 years of finance and accounting experience. Mr. Willig also ran a consulting practice and provided valuation, analysis, and transactional support services to multi-billion dollar real estate companies. Previously, Mr. Willig served as the Senior Controller and Vice President of Financial Analysis and then the Chief Financial Officer of the Athena Group, a multifamily development company and fund manager.

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