1031 exchanges account for an estimated 15% of all US commercial real estate transactions annually. That’s $185 billion worth of 1031 exchanges per year!

Not only is it a huge market, but it’s more than a century old. The 1031 exchange rules were created in 1921 following World War I.

There are 4 primary types of 1031 exchanges:

1. Forward Exchange: In a Forward Exchange, an investor sells a property first, then buys within 180 days.

2. Reverse Exchange: In a Reverse, an investor buys first, then sells within 180 days. This is done utilizing a “parking arrangement” whereby a Qualified Intermediary holds the replacement property until the relinquished property can be sold.

3. Simultaneous Exchange: A simultaneous buy-sell. These types of exchanges aren’t very common today.

4. Improvement Exchange – Forward or Reverse: In an Improvement Exchange, an investor invests in the acquired property – which can include repairs, improvements and / or new construction – using exchange equity. Improvement 1031 Exchanges are used in conjunction with either a Forward Exchange or a Reverse Exchange structure.

There is no limit to the number of times you can do 1031 exchanges. Many 1031 grandmasters just keep exchanging. Why? Because if you keep rolling one 1031 exchange into another until your time on Earth is up, you will not only have deferred taxes on your gains each time, but you will have accomplished the seemingly impossible: avoiding taxes altogether. How is this? Because when your properties pass to your kin, they get a step-up in basis, effectively making a lifetime worth of gains invisible to the US Government.

This is known as the “swap ‘till you drop” strategy (see here).

You can exchange raw land for a rental home, an apartment complex for a shopping center or rental houses for an office building – there are more than 16 types of real estate that qualify for 1031 exchanges. And you can exchange any of these types of property inside any of the 384 Metropolitan Statistical Areas in the US. So long as all property is held for business or investment purposes, you have nearly infinite exchange options (see here).

There is no provision in the 1031 rule book that states you have to publicly disclose that you're doing a 1031 exchange. You don't need to tell anyone you're exchanging other than your QI and your tax advisors. And you certainly don't have to advertise yourself as a 1031 buyer.

There are many ways to prepare for a 1031 exchange before the 45-day identification clock starts ticking. You can put your replacement property under contract first. You can enter into an option contract to buy your replacement property. Or you can have your broker create a shortlist of target replacement properties for you. There are many things you can do to plan ahead and eliminate the time pressure of a 1031 exchange.