Selling an investment property and hoping to keep more of your gains working for you? A properly executed 1031 exchange can defer federal capital gains taxes and help you scale your portfolio in San Antonio. You want a clear plan, tight timing, and local insight so your replacement property delivers the income and stability you expect. In this guide, you’ll learn the key rules, how to hit the deadlines, and smart replacement property strategies that fit Bexar County. Let’s dive in.
1031 basics you must get right
What qualifies as like-kind
A 1031 exchange lets you defer federal capital gains taxes by selling investment or business real property and buying other real property of like-kind. For real estate, like-kind is broad. You can exchange land for a rental house or an apartment building for a medical office if both are held for investment or business use. Personal residences, dealer inventory, or securities are not eligible. For official guidance, review the IRS overview of like-kind exchanges.
You report the exchange on IRS Form 8824 in the tax year the exchange is completed.
Deadlines that drive your deal
Two federal timelines control your exchange:
- 45-day identification period: After you transfer your relinquished property, you have 45 calendar days to identify replacement property in writing to your qualified intermediary.
- 180-day exchange period: You must close on your replacement property within 180 days of transferring the relinquished property, or by your tax return due date for that year if earlier.
Your identification must follow one of these rules:
- 3-property rule: Identify up to three properties of any value.
- 200% rule: Identify any number of properties if their total value does not exceed 200% of the relinquished property’s value.
- 95% exception: If you exceed the 200% threshold, you must acquire 95% of the total value identified. This is rarely used because it is strict.
Avoid taxable boot
Any cash or non-like-kind property you receive is boot and is taxable to the extent of your realized gain. Debt matters too. If your replacement property has less debt than the relinquished property, that debt reduction can be treated as boot. To fully defer, most investors aim to buy equal or greater value and replace equal or greater debt, or add cash to offset debt reduction.
Build your San Antonio 1031 team
Who you need on your bench
A smooth exchange relies on the right people working on a shared timetable:
- Qualified intermediary (QI): Holds proceeds, prepares exchange documents, receives your identification, and coordinates with closing. Vet options through the Federation of Exchange Accommodators.
- Local real estate agent: Sources viable replacement options, models rents and operating numbers, and guides local due diligence.
- Title and escrow: Manages deed transfers, vesting, and funding through the QI.
- Lender: Aligns underwriting and closing with your 45- and 180-day deadlines.
- CPA and exchange attorney: Advises on basis, depreciation recapture, and how to avoid boot.
1031 step-by-step in Bexar County
Use this simple sequence to keep momentum:
- Pre-sale planning: Decide to exchange before listing. Select your QI and have draft exchange documents ready.
- List and sell: Accept offers that allow proceeds to route to the QI at closing.
- Shop early: Tour and underwrite replacement options as soon as you go under contract on your sale.
- Identify by Day 45: Send written identification to your QI. Use exact addresses and stay within the 3-property or 200% rule.
- Close by Day 180: Coordinate lender payoff, new financing, and title work so you take title in time.
- Report: Gather closing statements and work with your CPA to file Form 8824 in the year the exchange completes.
Common pitfalls to avoid
- Touching proceeds: You cannot receive or control sale funds in a delayed exchange.
- Missing deadlines: The 45-day and 180-day clocks are hard limits.
- Thin lender timelines: Build buffer for underwriting and appraisal so you do not compress Day 180.
- Ignoring debt replacement: Plan your leverage early to avoid accidental boot.
- Weak QI selection: Choose a financially sound, insured QI with proven processes.
Replacement property strategies in Bexar County
Your best replacement property depends on income goals, management style, and risk tolerance. San Antonio’s diverse economy, military presence, healthcare systems, universities, and growing logistics sector create steady demand across several property types.
Single-family rentals (SFR)
SFRs can be a nimble way to spread risk across submarkets. Financing is straightforward, and you can scale into multiple doors using the 3-property or 200% identification rules. Expect higher per-door turnover and management costs compared with multifamily. In Bexar County, many suburban areas north and west of the city, and select south-side pockets, have shown consistent renter demand supported by employment nodes and conveniences. If you are trading out of one large asset, acquiring two or three SFRs can diversify your rent roll.
Small multifamily (2–20 units)
Small apartment buildings can deliver stronger cash flow and operational efficiencies versus SFRs. With multiple units under one roof, you can improve net operating income through targeted renovations and professional management. These properties are location sensitive and may require more active oversight. In and near central neighborhoods, near universities, or by major employment centers, you can often find stable demand and value-add potential.
Commercial and net-lease options
Commercial assets cover a wide range of risk and return profiles.
- Industrial and logistics: San Antonio’s access to I-10 and I-35 supports distribution and last-mile demand. Simple building formats and tenant-paid expenses can lead to durable income.
- Medical office: The region’s healthcare footprint can support well-located medical space near hospitals and clinics. Tenant credit and lease term drive stability.
- Retail: Neighborhood retail serving daily needs can perform steadily. Focus on traffic drivers and tenant mix.
- Office: Office demand varies by submarket. Underwrite tenant credit, lease roll, and backfill risk carefully.
Triple-net leases can reduce management burden, but single-tenant concentration may increase cash flow risk if a vacancy occurs. Balance credit quality, remaining lease term, and location fundamentals.
Match strategy to your goals
- Preserve income with less hassle: Target stabilized small multifamily or a net-leased medical or industrial asset with conservative leverage.
- Push cash flow with hands-on improvements: Acquire value-add small multifamily or a cluster of SFRs where modest renovations can raise rents.
- Favor credit and long-term leases: Consider single-tenant net-lease retail or industrial with strong tenants and rollover protection.
Financing and debt planning
Your lender’s timing and your debt structure affect taxes and execution. Many lenders have dedicated 1031 processes and will request QI documentation. Plan your leverage so that your replacement property’s value and debt meet or exceed your relinquished property to avoid taxable debt relief. For commercial properties, you may see non-recourse options. For SFR portfolios, expect more personal recourse. Align the financing path with your risk tolerance and closing calendar.
Quick tips:
- Get pre-approved before you list your sale.
- Share the 45- and 180-day milestones with your lender on Day 1.
- Order appraisals and inspections early to protect your schedule.
Local due diligence checklist
San Antonio rewards disciplined underwriting. Use these checks to validate your replacement pick.
Market-level checks
- Track local sales and rent trends through the San Antonio Board of Realtors.
- Review regional economic updates from the Federal Reserve Bank of Dallas.
- Scan industry and employer growth via the City of San Antonio Economic Development and local business publications.
Property-level checks
- Title and vesting: Confirm clear title and any open permits.
- Condition: Inspect structure, roof, HVAC, plumbing, electrical, and environmental risks. For commercial or industrial, consider a Phase I environmental assessment.
- Zoning: Verify use and any renovation plans with local code requirements.
- Flood and insurance: Parts of San Antonio are in FEMA flood zones. Budget for flood insurance if applicable and check elevation certificates when needed.
Financial and tax checks
- Leases: Verify current leases, expirations, and tenant credit.
- Income and expenses: Confirm with third-party reports and historical statements.
- Taxes: Review history and projected assessments through the Bexar County Appraisal District, and plan for potential appeals.
- Capital plan: Estimate near-term CapEx and reserves.
Reverse or improvement exchanges
Not every timeline lines up perfectly. If you find the right replacement property before you sell, a reverse exchange may fit, but it is more complex and uses an Exchange Accommodation Titleholder structure. If you need to renovate the replacement asset before you take title, a construction exchange might help. Both require careful coordination with your QI, lender, and attorney, and they tend to cost more than a standard delayed exchange. The IRS provides the overarching framework for these structures in its like-kind exchange guidance.
Sample timeline to stay on track
- Day 0: Close your sale. Proceeds move to the QI. Start inspections and loan applications on target replacements.
- Day 1–20: Tour assets, gather rent rolls, request lender term sheets, and run operating scenarios.
- Day 21–30: Negotiate purchase contracts on your top options. Order appraisals and property inspections.
- Day 45: Deliver written identification to your QI. Use exact addresses and stick to your chosen rule.
- Day 46–120: Clear lender conditions, finalize title, and secure insurance.
- Day 121–170: Complete any final repairs or seller credits and confirm loan docs.
- Day 180: Close on replacement property. Coordinate final statements for your CPA to prepare Form 8824.
Ready to plan your 1031 in San Antonio?
A successful exchange blends tax rules with local execution. When you have the right QI, lender, and agent, you can hit your deadlines and land a replacement that fits your income goals. If you want help sourcing SFRs, small multifamily, or commercial properties across Bexar County and managing the process from offer to close, connect with a local, investor-minded partner.
Schedule your plan today with Scott Alexander for a responsive, step-by-step 1031 strategy tailored to San Antonio.
FAQs
What is a 1031 exchange and who can use it?
- A 1031 lets you sell investment or business real property and buy other real property of like-kind while deferring federal capital gains tax, as outlined by the IRS.
What are the 45-day and 180-day deadlines in a 1031?
- You must identify replacement property in writing within 45 days of selling and close on the replacement within 180 days, or by your tax return due date if earlier.
How do the 3-property and 200% identification rules work?
- You can name up to three properties of any value, or any number of properties so long as their combined value does not exceed 200% of the property you sold.
What is “boot” in a 1031 exchange?
- Boot is taxable cash or other non-like-kind property you receive. Debt reduction can also create boot if your new loan is smaller than the old one and you do not add cash.
Do I need a qualified intermediary in San Antonio?
- Yes, for a delayed exchange you must use a QI to hold proceeds and handle documentation. You can vet QIs through the Federation of Exchange Accommodators.
What replacement properties work best in Bexar County?
- Common targets include single-family rentals, small multifamily, and select commercial assets like industrial or medical office, depending on your income goals and management preferences.
Where can I find official IRS information on 1031 exchanges?
- Start with the IRS guidance on like-kind exchanges and the overview for Form 8824.
