I love 1031 Exchange!!! YES!!!

In a 1031 exchange (also called a property flop) investors have 45 days to identify three potential replacement properties. There is also a 180-day period that runs simultaneously to the closing. Exchangers must reinvest all proceeds, and a third-party intermediary (also known as an accommodator) must hold the cash in trust.

The Equity held by the investor in the new property must equal or exceed the equity held in the previously owned property. Exchanges can range from a simple two-property swap to a multi-legged, multi-property deal that involves a “construction” exchange or a “reverse” exchange, where an investor buys the replacement first before selling the exchange property.

Here's an example of a 1031 exchange: Imagine that you bought a property that's worth 2 million dollars. Then you fixed up the property to be apprised for 4 million. You then trade the property for 2 other properties at 2 million each. Now assuming that the properties need rehabbing, fix them up for resale.

Now keep in mind, that some states have different law about the 1031 exchange. So it is a good idea to do your research before you try this real estate strategy. To successfully complete a 1031 exchange it is vital that the investor have a clear plan as to both the types of investments they are going into and how to pass through the various stages of a 1031 exchange.