The 1031 Exchange
The benefits of a 1031 exchange are:
Preserve more capital
Upgrade to larger or higher-performing assets
Increase rental income
Diversify your portfolio
Accelerate wealth building — all while maintaining or improving your overall financial position.
A Pathway for Wealth-Building
A 1031 exchange (under Internal Revenue Code Section 1031) allows apartment building owners to sell their investment property and reinvest the proceeds into another like-kind property without paying immediate capital gains taxes.
Eligible 1031 exchange properties
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Multifamily and residential investment properties have proven to be one of the most resilient asset classes, even during economic downturns and market volatility.
Some Los Angeles apartment building owners prefer to stay within the multifamily sector by completing a 1031 exchange and rolling their equity into new apartment deals. These replacement properties can be located in Los Angeles, Southern California, or in other states with more landlord-friendly legislation.
Whether you’re looking for larger properties with more units, stronger cash flow, newer construction, non-RSO assets, or better locations, our team has a proven track record of successfully executing multifamily-to-multifamily 1031 exchanges in Los Angeles and beyond.
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A triple net lease (NNN lease) is a popular commercial real estate lease structure where the tenant pays for all property expenses — including real estate taxes, building insurance, maintenance, and common area costs — in addition to base rent and utilities.
Many Los Angeles multifamily owners use a 1031 exchange to sell their apartment building and move into low-maintenance triple net properties. These hands-off investments provide stable, long-term cash flow with minimal day-to-day management responsibilities, making them an attractive option for investors seeking passive income and reduced operational headaches.
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Vacant land and development sites make excellent 1031 exchange replacement properties. Many LA multifamily owners exchange their apartment building into vacant land to defer capital gains taxes and unlock long-term appreciation through future development.
We help clients find strategic parcels with strong potential for rezoning, subdivision, or new construction — locally in Southern California or in other high-growth markets — to build greater equity and achieve their investment objectives.
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Real estate syndication is a powerful investment model where a group of investors pool their capital to purchase larger properties, such as apartment buildings, that would be difficult to buy individually. A professional sponsor (syndicator) identifies the deal, manages the property, and handles day-to-day operations while passive investors receive a share of the rental income, profits, and appreciation.
Case Studies
Real client 1031 exchanges
Multifamily to Net Lease
Culver City, CA → Elk Grove Village, IL
Downleg Property
3822 Bentley Ave, Culver City, CA
Sale Price: $2,200,000
Cap Rate: 4.00%
Asset Type: Multifamily
Management: Active Ownership
Upleg Property
947 Meacham Rd, Elk Grove Village, IL
Purchase Price: $2,600,000
Cap Rate: 4.20%
Tenant: McDonald's Corp.
Lease Type: Absolute NNN
Net Result: Increased cash flow, no landlord responsibilities
Client Objective
The clients had owned and operated a multifamily property in Culver City for a number of years, accumulating substantial equity in the asset along the way. While the building had been a sound long-term investment, the realities of active ownership had grown increasingly frustrating. A persistent pattern of tenants paying rent late — compounded by a constant drumbeat of maintenance requests and the operational headaches inherent to managing residential real estate — had eroded the ownership experience. The clients approached our team with one clear objective: sell the multifamily building, execute a tax-deferred 1031 exchange, and redeploy their equity into a completely passive, institutionally backed investment that would deliver reliable monthly income without requiring a single phone call, repair request, or tenant interaction.
Execution
Drawing on our expertise in commercial property sales and 1031 exchange advisory, we successfully sold the clients' Culver City property at 3822 Bentley Ave for $2,200,000 — representing a 4.00% capitalization rate. With exchange proceeds secured, we immediately activated our national network of triple-net (NNN) lease specialists to identify the ideal replacement asset. After a rigorous analysis of available opportunities — evaluating tenant credit quality, absolute NNN lease structures, remaining lease term, demographic fundamentals, traffic volume, and long-term investment-grade stability — we identified a corporate McDonald's in Elk Grove Village, Illinois. McDonald's Corporation, a Fortune 500 global institution and one of the most creditworthy commercial tenants anywhere in the world, offered the gold standard in passive net-lease ownership: a guaranteed monthly wire deposit, with zero landlord obligations under an absolute NNN lease.
Outcome
The clients successfully acquired the McDonald's at 947 Meacham Road, Elk Grove Village, Illinois for $2,600,000 — and at a 4.20% capitalization rate, a meaningful improvement over their 4.00% downleg, resulting in a net increase in annual cash flow. Under the terms of the absolute NNN lease, McDonald's Corporation bears 100% of all property taxes, building insurance, maintenance, and capital expenditures — leaving the clients with absolutely zero landlord obligations. Each month, a guaranteed wire transfer arrives directly into their bank account from one of the most financially stable companies in the world. In a single exchange, the clients completed the transition from active landlords chasing late rent and fielding maintenance calls to true passive investors — "coupon clippers" collecting reliable monthly income from a global brand with no involvement required. The exchange was executed flawlessly within the IRS-mandated 45-day identification and 180-day closing windows.
Multifamily to Net Lease
West Hollywood, CA → Lompoc, CA
Downleg Property
1124 N. Sherbourne Dr., West Hollywood, CA
Sale Price: $12,000,000
Units: 23
Price/Unit: $521,739
Cap Rate: 2.20%
Upleg Property
1500 N. H Street, Lompoc, CA — Albertsons
Purchase Price: $15,000,000
Cap Rate: 5.97%
Lease: 20-Year / Absolute NNN
Rent Increases: 2.0% Annual
Net Result: Yield nearly tripled — 2.20% → 5.97% cap rate
Client Objective
The client owned a 23-unit apartment building in West Hollywood — one of the most coveted, and most heavily regulated, multifamily submarkets in Los Angeles. While the asset represented a significant store of wealth, the investment reality told a different story. At a 2.2% in-place capitalization rate, the property was generating a fraction of what its value could be producing elsewhere — a hallmark of the rent-controlled West Hollywood market, where long-tenured residents often pay rents well below current market levels. The client recognized that he was sitting on a highly appreciated asset that was dramatically under-performing on a yield basis. The client's objective was clear: monetize the equity through a strategic sale, execute a 1031 exchange, and redeploy his capital into a high-yield, completely passive investment with no rent control exposure, no management burden, and no landlord responsibilities.
Execution
1124 N. Sherbourne Drive, the 23-unit West Hollywood building, was successfully brought to market and closed at $12,000,000 — representing $521,739 per unit, a testament to the continued strength of demand for prime West Hollywood multifamily. With the client's exchange proceeds secured, we immediately activated our national NNN specialist network to identify the highest-quality replacement asset available. The mandate was clear: recession-resistant, investment-grade tenancy under a long-term absolute NNN structure. After evaluating opportunities across essential retail sectors, we identified an Albertsons grocery store in Lompoc, California at 1500 N. H Street. Albertsons Companies is a publicly traded Fortune 500 corporation and one of the largest grocery operators in the United States — offering the client an absolute NNN lease with a 20-year term and 2% annual rent increases built in from day one. Grocery-anchored NNN assets of this caliber are among the most sought-after and durable investments in commercial real estate.
Outcome
The client successfully acquired the Albertsons at 1500 N. H Street, Lompoc for $15,000,000 at a 5.97% capitalization rate — nearly triple his 2.2% downleg yield, delivering an immediate and dramatic improvement in annual income. The 20-year absolute NNN lease structure ensures that the client's income is not only completely passive, but grows predictably every single year through built-in 2% annual rent increases — compounding his cash flow over the full lease term without any effort on his part. Under the absolute NNN terms, Albertsons Companies bears 100% of all property taxes, building insurance, maintenance, and capital expenditures — the client has zero landlord obligations of any kind. Each month, a direct wire arrives from one of the nation's largest grocery operators, and each year that payment automatically increases. The client transformed a low-yield, rent-controlled apartment building into a high-income, long-term passive investment with institutional credit, two decades of lease security, and built-in annual income growth.
Double 1031 Exchange
WEHO → San Diego → Escondido, CA
Downleg — Summer 2023
1008 N. Stanley Ave, West Hollywood, CA
Sale Price: $3,700,000
Cap Rate: 4.60%
Price/SF: $440/SF
Exchange 1 — San Diego (2023)
24,000 SF Warehouse, San Diego Bay, CA
Purchase (2023): $3,600,000
Sold (2025): $5,000,000
Equity Gain: +$1,400,000
Final Upleg — Spring 2025
218 E. Grand Ave., Escondido, CA
Purchase: ~$5,000,000
Asset Type: 26-Unit Retail Center
Income: Nearly 3x Stanley
Net Result in 2 years: $1.4M+ equity gained, income nearly tripled
Client Objective
In the summer of 2023, the client made the strategic decision to list and sell his West Hollywood multifamily property at 1008 N. Stanley Avenue, closing at $3,700,000 — a 4.60% capitalization rate at $440 per square foot. Facing significant capital gains exposure, the client was committed to preserving his equity through a 1031 exchange. But his vision extended far beyond a simple asset swap. With a keen eye for identifying undervalued commercial real estate, he set out to execute a deliberate two-stage strategy: first, acquire a well-positioned asset with meaningful appreciation potential, then rotate that amplified capital into a high-income commercial property. His goal was to significantly grow both his equity and his monthly cash flow — while deferring all capital gains taxes along the way.
Execution
Following the Stanley sale, we identified a 24,000 square foot industrial warehouse situated on San Diego Bay as the ideal first exchange target. The client acquired the asset for $3,600,000 — purchasing it below his downleg sale price and establishing a low, favorable cost basis from day one. While the property did not generate significant cash flow during the hold period, our thesis was anchored in intrinsic value and market fundamentals. He invested virtually no additional capital into the asset throughout the hold. In the spring of 2025 — just two years later — we sold the San Diego warehouse for $5,000,000, realizing a $1,400,000 gain and nearly doubling his equity in under 24 months. He immediately structured the sale as a second 1031 exchange, rolling his full $5,000,000 in proceeds into his final — and most powerful — acquisition.
Outcome
Armed with $5,000,000 in exchange proceeds, we identified, and our client acquired, 218 E. Grand Avenue in Escondido, California — a 26-unit retail center delivering the income-producing commercial anchor he had been building toward from the outset. The property generates nearly three times the annual income he was earning at his original Stanley Avenue property, representing a transformational improvement in his monthly cash flow position. In just over two years and through two precisely executed 1031 exchanges, the client grew his real estate equity from $3,700,000 to over $5,000,000, nearly tripled his annual income, and deferred all capital gains taxes throughout the entire journey. What began as a West Hollywood multifamily sale was methodically repositioned — through disciplined strategy and expert execution — into a high-performing commercial income engine.
Ready to take advantage of the 1031 exchange?
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