Florida 1031 Exchange for Residential Rental Properties

Are you a rental property investor looking to upgrade your portfolio without having to pay a hefty amount of taxes? If so, a 1031 exchange is the perfect opportunity for you. A 1031 exchange may sound intimidating and confusing, but the process is fairly simple to understand when broken down. 

As a professional Tampa property management company, we’re able to guide clients through the process of a 1031 exchange from start to finish. We know how beneficial this process can be and we want to share our knowledge with you, so here is everything you need to know about a Florida 1031 exchange.

What is a Florida 1031 Exchange?

A Florida 1031 exchange takes place during the sale of an investment property and reinvestment of another property of equal or greater value — an “exchange” of properties. The process is highly favorable because it exempts investors from paying capital gains taxes on the profits from the sale.

In simple terms, say you have a rental property investment but you’re looking to upgrade and invest in another property. If you sell your property and purchase a property of the same or greater value, you don’t have to pay taxes on your profits if they are used to purchase another investment . A 1031 exchange applies only to investment or business properties and excludes personal residential properties.

The “catch” of the 1031 exchange is the time period in which you must identify and purchase a new investment property. To be eligible for a 1031 exchange:

  • The new property must be identified within 45 days from the sale of the property
  • You must close on the new property within 180 days of the identification 

We highly recommend working with experienced property manager, as finding and facilitating the purchase of a new rental property will be less overwhelming and time consuming. 

What Are the Benefits of a 1031 Exchange? 

There are multiple instances in which a 1031 exchange may be beneficial for a real estate investor. While the reasons for wanting to exchange properties vary, one benefit remains prevalent: the tax benefits.  

1031 Exchange Tax Deferral

If an investor follows all of the rules and regulations of a 1031 exchange, they have the ability to defer capital gains taxes upon the sale of the property. Typically, when a property sells at a higher price point than the original purchase price, this results in a profit. When a profit, or capital gain is made, federal taxes apply. However, reinvesting the profits in a like-kind property within the timespan allows an investor to preserve more capital and upgrade their portfolio with a 1031 exchange.

Avoiding capital gains taxes through a 1031 exchange means that the investor gets to keep more of their own hard earned money and use it to continue building wealth. 

Upgrade Your Rental Property Portfolio 

An essential benefit of the 1031 exchange is that it allows investors to upgrade their rental portfolio. The 1031 exchange is a perfect opportunity to invest in a larger, newer, or upgraded rental property. Although the property can be of equal value, there are no restrictions regarding size or condition of the property.

If your property needs work that you’re not willing to put time and effort into, the 1031 exchange will allow you to sell your property and purchase one of the same or greater value that may have newer construction or upgrades. You can facilitate a 1031 exchange regardless of the state or grade of the property as long as it’s of equal or greater value. 

The 1031 exchange gives you an opportunity to invest in a house with greater curb appeal, leading to decreased vacancies, larger return on investment, and overall satisfaction. It’s the perfect way to exchange your fixer upper for a turn-key property! 

Invest in a New Area

The 1031 exchange allows you to invest in a new area or even a new state. There are no geographical restrictions for a 1031 exchange which means you can sell your property and invest the profits into a new property in a new location. However, a 1031 exchange only applies to the United States and excludes properties outside of the country.

Tampa rental property investment

The area you purchased your investment property in may have changed since your initial investment. As time goes on, different cities become more popular and evolved, opening up opportunities for rental property investors across the country.

Diversify Your Portfolio

Another reason to facilitate the 1031 exchange is to diversify your investment portfolio. The 1031 exchange must be an exchange of real property for real property, meaning residential property, commercial property, or land. 

If you are selling a commercial investment property, the 1031 exchange presents the opportunity to purchase a residential property or a piece of land to be used for investment purposes, and vice versa. In addition, residential property investors can use the 1031 exchange between single family and multifamily properties

Why Is a Tampa Rental Property a Good Investment?

If you’re looking to build wealth, we highly recommend following in the footsteps of the 90% of millionaires that own real estate. Investing in a rental property can give you financial freedom and truly change your life. As Tampa property managers, we’ve witnessed firsthand how investors and accidental landlords benefit from owning rental properties. The most beneficial aspects of owning a rental property are:

  1. Property appreciation
  2. Tax benefits
  3. Steady income
  4. Rental property profits
  5. Hedge against slow sales market
  6. Retirement planning

The best part of owning a rental property is that someone else pays your mortgage. The longer the tenant occupies your property, the more equity you gain in that real estate asset. Whether you have a mortgage to pay off or you own the property outright, you’ll be able to enjoy the additional income every month.

When you facilitate a 1031 exchange, you will be able to reap appreciation profits by owning the property for an extended period. Over time, as you own a property and eventually sell it, appreciation benefits will occur when the property is sold for a higher price than the purchasing price. You can then use your capital gain for another 1031 exchange, allowing for a lifetime of passive income.

How Can a Tampa Property Manager Assist with a 1031 Exchange?

If you’re unsure of where to begin with a 1031 exchange, hiring a professional property manager will be highly beneficial. We know that selling your investment property and searching for a new one within 45 days can be intimidating and time-consuming, and you may not know where to start. However, we’re here to tell you that a 1031 exchange is one of the best ways to grow, update, or diversify your investment portfolio, and it’s worth it.

As Tampa property managers with years of experience, we deal with investment properties and rental property owners daily. As experts in the field, we can assure you that rental properties are always in demand in Tampa — if you already own property in Tampa you can attest to this. However, if you’re looking to trade in your investment from a different part of Florida or the United States, we highly recommend reinvesting your assets in Tampa. Your investment property will prosper with some research and the right Tampa property management approach.

The guidance of a reliable local property manager can be highly beneficial to both first-time exchangers and seasoned real estate investors. Our team of property managers and real estate sales professionals can guide you through every step of the way, from selling your property to vetting and selecting the perfect tenants for your new investment.

If you’re in the process of, or looking to complete a 1031 exchange and need additional insight on the potential investment, reach out to us here at The Listing Real Estate Management, your boutique property managers. Contact us today to get started!

Copyright © 2017-2024, The Listing Real Estate Management. All Rights Reserved.

Recent Posts

Subscribe to our Newsletter Today!

TPA - Subscribe to Our Blog

"*" indicates required fields

This field is for validation purposes and should be left unchanged.


Share this post:


Get in touch with us

Table of Contents

The Listing Real Estate Management

Your Guide to a Successful Rental Experience.

We’ve helped thousands of Tampa and Central Florida landlords, rental owners, and real estate investors with successful rental management for 15+ years. Your investment is in good hands here at The Listing Real Estate Management.

Explore More Educational Content

Check out all of our Educational & Informational blog posts.

RE Corp: CQ1056007

Office Visits Are By Appointment Only

follow us on

Copyright @ 2023 The Listing Real Estate Management. All Rights Reserved.

The Listing Real Estate Management is committed to ensuring that its website is accessible to people with disabilities. All the pages on our website will meet W3C WAI’s Web Content Accessibility Guidelines 2.0, Level A conformance. Any issues should be reported to Info@thelistingrem.com.

Website Accessibility Policy | Privacy Policy | Terms & Conditions