Should you do a 1031 exchange?
Compare your options side by side. Every situation is different.
Which situation sounds most like you?
1031: Direct Property | 1031: DST | Sell & Pay Tax | Installment Sale | Opportunity Zone | |
|---|---|---|---|---|---|
| Tax treatment | Full deferral of capital gains | Full deferral of capital gains | Immediate capital gains tax due | Spread gains over payment period | Deferral + potential exclusion after 10 years |
| Management | You manage (or hire property manager) | Professional sponsor manages | No ongoing management | No ongoing management | Varies by investment |
| Control | Full control over property decisions | No control; passive investor | N/A — no property acquired | N/A — no property acquired | Varies by investment structure |
| Timeline pressure | 45-day ID + 180-day closing deadlines | 45-day ID + 180-day closing; DSTs can close faster | No deadlines | No exchange deadlines | 180-day investment window |
| Minimum investment | Equal or greater value than sold property | Typically $100K–$200K minimum | No minimum | No minimum | Varies by fund/investment |
| Best for | Investors who want control and direct ownership | Passive investors seeking institutional properties | Those prioritizing simplicity over tax efficiency | Sellers who want flexibility without full tax hit | Long-term investors in designated zones |
| Risk profile | Direct real estate risk; tenant, market, property-specific | Diversified; sponsor risk; illiquidity | No real estate risk; market risk if reinvested | Buyer credit risk; interest rate exposure | Development/business risk in OZ areas |
This table is a planning summary for educational purposes. Consult a tax professional for advice specific to your situation.
Not sure which path fits?
Talk to a specialist who can help you evaluate your options.
Deep Dive: Understand Each Option
A direct 1031 exchange lets you sell one business or investment real property and buy another of equal or greater value, deferring all capital gains taxes. You choose the replacement property, manage it how you see fit, and maintain full control over your investment.
The tradeoff: strict IRS deadlines. You have 45 days from closing to identify up to three replacement properties and 180 days to close. Missing these deadlines means losing the tax deferral entirely.
Pros
- Full control over property selection and management
- Build equity through your own decisions
- Potential for value-add improvements
- 1031 into another exchange later
Cons
- 45-day identification deadline creates pressure
- Must find suitable replacement property quickly
- Ongoing landlord responsibilities
- Concentrated risk in single property
Best for
Investors who want hands-on control, have time to find replacement property, and are comfortable with landlord responsibilities.
Want to explore on your own first?
Take the quiz to get a personalized recommendation based on your situation.
Take the Best Path Quiz