What You Can Actually Buy in a 1031 Exchange

When people hear about exchanging real estate, they might assume you must buy the same type of property you sold — apartments for apartments, land for land, commercial for commercial.

That’s wrong.

In fact, 1031 exchanges are a great way to exchange one type of property for another type. For example, if you are tired of fixing toilets, you can exchange a condo for a parking lot and collect rent without the hassle of maintenance calls.

In general, if you sell real estate, and use the proceeds to purchase ANY type of real estate, ANYWHERE in the US, you can postpone that capital gains tax bill, provided you meet the other IRS requirements of a 1031 exchange.

That’s it.

It doesn't matter if the new property:

• Has a different use
• Is in a different state
• Is a different building type
• Is leased or vacant
• Produces income
• Is stabilized or raw land

Examples of What you can Buy

✔ Multifamily → Industrial

Sell your 8-unit apartment building in Los Angeles. Buy a small warehouse in Phoenix.

✔ Raw Land → Apartments

Sell undeveloped land. Buy a stabilized multifamily building.

✔ Retail → Self-Storage

Sell a strip mall. Buy a storage property.

✔ Office → Mixed-Use

Sell an office building. Buy a mixed-use property.

✔ SFR Rental → Commercial Building

Sell a tenant-occupied single-family rental. Buy an office, retail, or industrial property.

✔ California → Any Other State

The IRS imposes no geographic restriction.
You can exchange into any U.S. state or territory.

What You CANNOT Buy

❌ You cannot exchange into a REIT.

REIT shares are securities, not real estate.

❌ You cannot exchange into an LLC or corporation interest.

Buying:

• LLC membership interests
• LP shares
• Corporate stock

…is buying an entity interest, not real property — even if the entity owns real estate.

❌ You cannot exchange into tokenized real estate or crypto-backed “property tokens.”

These are digital securities, not direct real estate ownership.

✔ You can exchange into a Delaware Statutory Trust (DST).

DSTs are a special exception created by IRS.

A properly structured DST interest is treated as direct real estate ownership, which is why they’re popular with:

• Passive investors
• Retiring landlords
• People who want income without management

Common Questions

“Can you switch asset classes?”

Yes — almost always.

“Can you exchange in one state and buy in another?”

Yes — anywhere in the U.S.

“Can you buy multiple properties?”

Yes — if you follow one of the IRS identification rules.

“Can you buy something for personal use?”

No. Replacement property must be investment or business use.

The IRS Definition of Real Property (The Only Test That Matters)

Qualifying real property includes:

• Land
• Improvements to land (buildings)
• Permanent structures
• Structural components (HVAC, elevators, fire systems, etc.)
• Certain real-estate-related intangible rights (air rights, water rights, development rights, easements)

If it fits this definition, it is almost always like-kind with other real estate.

The Bottom Line

If it’s real estate, you can almost certainly exchange into it.

That flexibility enables investors to:

• reposition capital
• upgrade into better assets
• access stronger markets
• shift from active to passive ownership
• reduce management headaches
• build long-term wealth with tax-advantaged compounding

And that’s why having the right 1031 partner matters.

👉 Ready to start an exchange?