1031 Exchange in Coastal Real Estate: FAQ

A 1031 Exchange, named after Section 1031 of the IRS code, is a tax-deferral strategy that allows real estate investors to:

• Sell an investment property.

• Reinvest the proceeds into another “like-kind” investment property.

• Defer paying capital gains taxes on the sale.

For investors in Brunswick County, this means you can sell a property elsewhere and reinvest in a Holden Beach rental home, an Oak Island duplex, or a commercial property in Shallotte – all without an immediate tax hit.

Investors choose 1031 Exchanges because they:

• Defer capital gains taxes, allowing you to keep more equity working for you.

• Upgrade property type—for example, trading a single-family rental inland for an oceanfront vacation home with higher income potential.

• Diversify your portfolio across multiple Brunswick County properties.

• Build long-term wealth through appreciation and cash flow while postponing taxes.

This strategy is especially valuable in coastal markets, where property values have historically shown strong appreciation.

The IRS requires “like-kind” properties, but the definition is broader than most people think. Eligible properties include:

• Oceanfront vacation rentals in Holden Beach or Oak Island.

• Canal-front or second-row homes used as rentals.

• Long-term rental homes or condos in inland communities like Shallotte or Leland.

• Commercial real estate, such as retail or mixed-use properties.

As long as the property is held for investment or business use, it can qualify for a 1031 Exchange.

The IRS has strict requirements for a valid 1031 Exchange:

• 45-day identification period – You must identify potential replacement properties within 45 days of selling your current property.

• 180-day purchase window – The replacement property must be purchased within 180 days of the sale.

• Qualified Intermediary (QI) – Funds from the sale must be handled by a QI, not directly by the seller.

• Equal or greater value – To defer all taxes, the replacement property should be of equal or greater value.

Missing these deadlines or requirements can disqualify your exchange, so planning ahead is critical.

Yes – with limitations. If you rent the property enough to qualify as an investment and limit personal use, it may be eligible. However, personal vacation use must be carefully balanced with rental activity to meet IRS standards.

A 1031 Exchange allows you to:

• Consolidate – Sell multiple smaller properties and reinvest in one larger coastal investment.

• Diversify – Sell a single high-value property and spread your investment across multiple homes in Brunswick County.

This flexibility helps investors align their portfolio with lifestyle goals and income needs.

Yes. While a 1031 Exchange can be a powerful strategy, it’s also highly technical. You’ll need:

• A Qualified Intermediary to handle funds.

• A real estate attorney to ensure compliance with NC law.

• A real estate agent with local expertise to identify properties that fit IRS rules and meet your investment goals.

At PROACTIVE Real Estate, we work hand-in-hand with investors and their advisors to ensure smooth 1031 transactions in Brunswick County.

Our team provides:

• Access to the latest investment opportunities in Holden Beach, Oak Island, Ocean Isle Beach, and beyond.

• Market analysis to identify properties with strong rental income potential.

• Guidance through the 1031 timeline so you don’t miss key deadlines.

• Connections to trusted intermediaries, attorneys, and lenders experienced with coastal investment transactions.