All Things 1031 Exchange

If you own investment property in the Upstate and want to sell without writing a big capital-gains check, a 1031 exchange can be a powerful tool. The core idea is simple: sell one investment property, buy another like-kind investment property, and defer the tax bill so your money keeps working. But the rules are strict, the clock runs fast, and small mistakes can derail your deferral.

All Things 1031 Exchange

What Is A 1031 Exchange (And Why Upstate Investors Use It)

A 1031 exchange (IRS Section 1031) lets you defer capital gains and depreciation recapture when you swap investment or business real estate for other investment or business real estate. In practice, you’re selling a rental, land, or commercial property and rolling the proceeds into a new deal—often to improve cash flow, consolidate/upgrade assets, or move equity closer to Greenville’s growth corridors—without shrinking your buying power with taxes today. (Always loop in your CPA and attorney.)

The Three Pillars You Must Get Right

Timelines. 

From the day you close the sale (the “relinquished” property), you have 45 days to identify replacement property in writing and 180 days to close on it. These windows run at the same time and are hard deadlines.

Like-Kind. 

For real estate, “like-kind” is broad: land for rentals, single-family for multifamily, retail for industrial, etc. It must be held for investment or business use (not a flip or personal residence).

Qualified Intermediary (QI). 

You can’t touch the money. A QI holds the proceeds and coordinates exchange documents. If funds hit your account, the exchange is blown.

How The 45/180 Day Process Actually Plays Out

Day 0: 

Close the sale; proceeds go straight to your QI.

By Day 45: 

Submit your written identification to the QI (stick to one of the IRS-approved methods—most investors use the “3-property rule”).

By Day 180: 

Close on your replacement property (or properties). Your QI wires funds and furnishes exchange paperwork to the closing attorney and your CPA.

Miss a date, and it becomes a taxable sale.

Matching Dollars And Debt: Avoiding “Boot”

To fully defer taxes, you generally need to

(1) buy equal or greater price, and

(2) roll all net proceeds into the new deal, and

(3) replace equal or greater debt (or add cash to cover any shortfall).

Any cash out or debt reduction is “boot” and can be taxable. If you’re trading up in Greenville but borrowing less, plan to bring cash so your deferral stays intact.

Popular Variations (When The Market Doesn’t Line Up Perfectly)

Reverse Exchange. 

Buy first, sell later—use a specialized structure where an exchange accommodation titleholder (EAT) parks one side until the other closes.

Improvement (Build-To-Suit) Exchange. 

Use exchange funds for specified improvements before you take title; helpful when repositioning a property for Greenville’s tenant base.

DSTs. 

Delaware Statutory Trusts can be a passive replacement option if you want mailbox income and no landlording, though fees and liquidity differ from direct ownership.

What Doesn’t Qualify (And Common Pitfalls)

Primary residences and second homes don’t qualify unless legitimately converted to investment use. Flips held for resale are risky for 1031 treatment. Common pitfalls include touching the proceeds, blowing the 45-day ID (or identifying properties you can’t actually close on), and forgetting to replace debt—each can trigger unexpected taxes.

Greenville-Smart Ways To Use A 1031 Exchange

Trade management headaches for durable demand. 

Swap an older, maintenance-heavy single-family into a newer townhome or small multifamily near job centers, hospitals, or universities.

Reposition for cash flow. 

Move equity from a low-yield asset into a better-performing rental corridor (think access to the Swamp Rabbit Trail, downtown-adjacent neighborhoods, or strong school zones).

Consolidate or diversify. 

Roll several small rentals into one larger asset—or split one sale into two different product types to balance risk.

Documentation Your Lender, QI, And CPA Will Want

Executed exchange agreement with your QI, assignment of purchase/sale contracts, your written identification, closing statements for both sides, and a clean paper trail showing proceeds never touched your account. Keep everything—your CPA needs it at tax time.

Quick FAQs

Can I 1031 out of state and buy in Greenville (or vice versa)? 

Yes—like-kind is national.Can I move into the replacement later? Many investors rent it out first; after a qualifying investment period, discuss conversion and tax implications with your CPA.

What about improvements after closing? 

Post-closing improvements don’t count toward exchange value unless you used an improvement exchange structure.

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Bottom Line

A 1031 exchange is one of the few remaining ways to keep your equity compounding while you upgrade your portfolio. Respect the 45/180-day deadlines, let a qualified intermediary hold the funds, replace price and debt to avoid boot, and choose a replacement that fits Greenville’s long-term demand. Plan early with your CPA, and you’ll swap smarter—not just defer taxes.

Ien Araneta

Journal & Podcast Editor | Selling Greenville