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1031 Myths Debunked!

    A word cloud of words related to myths, fiction, information, etc. with a large DEBUNKED! in red written across it. Small text below says "This Month's Myth: The 1031 Exchange is only for Institutional Investors"

    This Month’s Myth: “The 1031 Exchange is only for Institutional Investors”

    Another myth that was more common 10 or more years ago yet I still hear people say this to me on a pretty regular basis. So many people are convinced that Article 1031 of the Internal Revenue tax code only pertains to institutional investors – that the article is a tax loophole that only those with deep pockets can take advantage of or that this is another example of how the rich get richer.

    This is completely false.

    In fact, more than 57% of 1031 transactions are less than 1,000,000 and more than 33% are less than 1/2 million.

    There are many opportunities to perform a successful 1031 Exchange for less than $1,000,000 including fee simple purchases and DSTs (Delaware Statutory Trusts).

    I have represented several investors who have had less than $500,000 to place for their exchange transaction.

    There simply is no specific language that limits a 1031 Exchange to small or large investors. The only exclusion is outlined in Section 1031 (a) (2) which states that a gained deferral is not available for any property that is held primarily for sale. This excludes developers who build and sell their developments and residential “flippers” as their purchases are considered inventory. However, anyone who holds property for productive use in a trade or business or for investment, is eligible to perform a 1031 Tax Deferred Exchange.

    If you are an investment property owner who is interested in a no obligation, private consultation, please visit, or contact James Bean of SVN-Rich Investment Real Estate Partners, CA DRE# 01970580, at 805-779-1031 or email at

    If you are an agent/broker, I am happy to discuss strategies with you on how to best serve your next listing client in preparing them for a successful exchange. Please visit the site and click on the Agent’s button located at the top right-hand corner of the Home Page!

    Don’t know what certain terms mean?

    Click here for a Glossary of Terms: 

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    All information is deemed to be accurate, and not advice. All investors/taxpayers should consult their CPA, tax attorney and investment advisors.