14 — September 2025 — 1031 Exchange — Financial — M id A tlantic Real Estate Journal
www.marej.com
1031 Exchange Northmarq 1031 Exchanges in 2025: Execution, Cash Flow & Tax Strategy in Focus
ertainty is rare in real estate, but investors now have clarity on one key strategy. The One Big Beautiful Bill Act (OBBBA) preserved Section 1031 of the Internal Revenue Code— commonly known as 1031 exchanges—assuring that investors can continue de- ferring capital gains taxes by reinvesting proceeds into like-kind properties. Early proposals contemplated cap- ping deferrals above $500,000, but those restrictions did not make it into the final legisla - tion. In addition to preserving 1031 exchanges, the OBBBA C
and position themselves for long-term success. But suc - ceeding in today’s environment requires more than just under - standing the rules. It demands a clear vision for both sides of the exchange. What Clients Are Prioritizing in 2025 While Section 1031 is in - tact, the overall market trans- action volume remains lower than in prior years. Higher rates, tighter financing and broader uncertainty have thinned activity, though the percentage of 1031 exchanges have held steady. The following continue to be
consistent themes we’re hear- ing from our 1031 exchange clients in today’s market. 1. Tax deferral and wealth preservation remain top pri- orities. 2. Improving cash flow continues to drive exchange activity. 3. Simplifying manage- ment is a common goal, espe- cially for owners transitioning out of multi-tenant, multifam- ily or hands-on assets. 4. Housing restrictions and regulations are push- ing investors out of restric- tive states and into more predictable, landlord-friendly markets. In practice, investors are pruning portfolios at key inflec - tion points—loan maturities, rental escalations or tenant credit changes—while also diversifying tenants and lease ladders to smooth cash flow. Geographical shifts remain two- way, with some reallocating to landlord-friendly states and others moving into supply-con- strained metros for insulation. Top Concern: Certainty of Execution Tight timelines and financ - ing complexity mean execution often drives decision-making. Many investors won’t sell without a replacement identi- fied, but waiting on the upleg can lead to delays or subop- timal choices. The most suc- cessful exchanges start with a disciplined process: lender alignment up front, multiple underwritten targets and contracts structured with 1031 cooperation and built-in exten- sions, while avoiding common mistakes that can derail the exchange. Dual tracking is especial- ly effective. Marketing the downleg while sourcing upleg options in parallel allows in- vestors to preserve timing and control. Leveraging national networks, off-market relation- ships and multiple LOIs keeps options open when the 45-day identification window begins. Market Dynamics: Inventory, Pricing and Strategy Inventory is selective but improving. Quality supply remains limited, but incre- mental volume is expected as financing clarity improves. More properties coming to market should expand buyer choice over time. Pricing is flexible but re- quires discipline. Sellers are continued on page 16
Chris Hall
David Annett
Joseph Dugoni
Lanie Beck
reinstated key tax initiatives, including permanent bonus depreciation and 100% ex- pensing of qualified improve - ments such as appliances, HVAC and flooring. For decades, 1031 exchang - es have been a cornerstone of wealth preservation and portfolio optimization. By
allowing investors to defer taxes when reinvesting in like-kind assets, the strategy provides flexibility to respond to market shifts, personal goals and regulatory changes. With the rules unchanged, savvy investors are using this moment to rethink their port- folios, simplify management
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