--- title: What is a Real Estate Rollover? description: Real estate rollover is unique to the 1031 exchange process and allows investors to defer capital gains, trade up in asset class and worth, and diversify their portfolios. image: https://www.realized1031.com/hubfs/rollover-881542122%20(1).jpg --- [![Realized 1031 Exchange Marketplace](https://www.realized1031.com/hs-fs/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black.png?width=240&height=80&name=Realized-Logo-Black.png "Realized 1031 Logo") ](https://www.realized1031.com/) - [Wealth Management Gap](https://www.realized1031.com/the-wealth-management-gap) - [Our Process](https://www.realized1031.com/how-realized-works) - [Financial Advisors](https://www.realized1031.com/advisor) - [Resources](https://www.realized1031.com/resources) - [The Company](https://www.realized1031.com/about-us) - [Articles](https://www.realized1031.com/blog) [Register](https://www.realized1031.com/marketplace) [Log In](https://www.realized1031.com/login) - Better Business Bureau Rating: **A+** - [FINRA BrokerCheck](https://brokercheck.finra.org/firm/summary/22333) - [Call](tel:1-877-797-1031) **(877) 797-1031** # What Is a Real Estate Rollover? Posted Jun 2, 2022 ![rollover-881542122 (1)](https://www.realized1031.com/hs-fs/hubfs/rollover-881542122%20(1).jpg?width=750&height=392&name=rollover-881542122%20(1).jpg) Real estate investment properties can offer many potential benefits, including important tax breaks, stable cash flows, passive income, [portfolio diversification](https://www.realized1031.com/glossary/diversification), and asset appreciation. In today’s frothy real estate market, where demand for investment properties often outstrips availability, investors may be considering divestiture of certain real property assets to capitalize on high asset appreciation. You’ll be on the hook for any realized gains above your investment basis in the asset, though, unless you complete a [1031 exchange](https://www.realized1031.com/1031-exchange-explained-ebook). Real estate investors have used 1031 exchanges for decades as a means to defer capital gains taxes. Investors who sell investment assets can defer taxes on any realized gains by rolling over all of the sale proceeds into another property. Real estate rollover is unique to the 1031 exchange process and allows investors to defer capital gains, trade up in asset class and worth, and diversify their portfolios. ### Example of Real Estate Rollover Rollover has long been associated with individual retirement accounts. If you leave a job and you had an employer-sponsored 401(k), you can rollover or transfer the funds from that account into a new IRA without incurring any penalties or tax obligations. Real estate rollover is the heart of a 1031 exchange. Selling an investment property outright, especially one with significant asset appreciation, can generate a taxable event that erodes overall profit. Long-term capital gains taxes for assets held more than one year are either 0, 15, or 20 percent depending on your income for that tax year. If you are a single filer who will report more than $445,850 in taxable income for 2022, you’ll pay the top rate of 20 percent in capital gains taxes. Here’s the difference between selling an investment property outright versus rolling over the sale proceeds and completing a 1031 exchange, assuming a 20-percent capital gains tax:  | Original basis:  $1 million  | Straight sale  | Asset sale price: $2 million  | Capital gains tax at 20%: $200,000 ($1 million @ 20%)  | Funds available for reinvestment: $1.8 million  | | --- | --- | --- | --- | --- | | Original basis: $1 million  | Rolling proceeds over into a 1031 exchange  | Asset sale price: $2 million  | Capital gains taxes due after a 1031 exchange: $0  | Funds available for reinvestment: $2 million  | Real estate rollover increases the purchasing power of your investment dollars and preserves your investment capital.  ### Real Estate Rollover Property Types Real estate rollover in a 1031 exchange is limited to “like-kind” properties. The Internal Revenue Service defines like-kind real estate assets as those that are of similar nature or character, even if they are different quality or grade. Essentially, that means when you are looking for replacement properties for a real estate rollover in a 1031 exchange, you should be looking for the same kind of property – exchanging a single-family investment property for another one, or a duplex for a tri-plex or larger multi-family property. You can do a real estate rollover from a 1990s residential investment property into a newly built house (higher asset quality) or a Class C apartment complex into a newer Class A multiplex (higher asset grade). One important aspect of 1031 exchanges is that the replacement property must be held for investment purposes. You can’t rollover the sale proceeds from an older single-family investment property into a new house that you intend to live in – the replacement asset has to be a rental, at least for a period of time to make sure you can satisfy the strict exchange requirements. ### The Bottom Line Real estate investments offer many potential benefits for investors. Real estate rollover through a 1031 exchange can do the same by preserving more of your investment capital and allowing you to purchase assets of greater value or higher quality. Consulting with professionals experienced in 1031 exchanges can help investors learn more about the potential benefits of real estate rollover. This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation. Costs associated with a 1031 transaction may impact investor’s returns and may outweigh the tax benefits. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities. All real estate investments have the potential to lose value during the life of the investment. Examples shown are for illustrative purposes only. This illustration does not reflect any fees or expenses that may be incurred during a real estate transaction, any fees or expenses would reduce the overall funds available for reinvestment. Actual results may vary and be more or less favorable than illustrated.  Learn Ways To Help Build Long-Term Real Estate Wealth [![Get Tips For Managing Real Estate Wealth](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/IPWM-eBook-250c.jpg?width=250&height=250&name=IPWM-eBook-250c.jpg "Learn new ways to use real ...") ](https://www.realized1031.com/blog/what-is-a-real-estate-rollover#blogform) Download eBook ---   --- ### Get Tips For Managing Real Estate Wealth ![Learn Ways To Help Build Long-Term Real Estate Wealth](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/IPWM-eBook-550.jpg?width=550&height=650&name=IPWM-eBook-550.jpg) Learn new ways to use real estate to pursue your wealth goals. By providing your email and phone number, you are opting to receive communications from Realized. If you receive a text message and choose to stop receiving further messages, reply STOP to immediately unsubscribe. Msg & Data rates may apply. To manage receiving emails from Realized visit the Manage Preferences link in any email received. Search ### [Why Realized](https://www.realized1031.com/why-realized) - [Wealth Management](https://www.realized1031.com/the-wealth-management-gap) - [Why Realized](https://www.realized1031.com/why-realized) - [Our Process](https://www.realized1031.com/how-realized-works) - [Scenarios](https://www.realized1031.com/scenarios) - [Private Client Program](https://www.realized1031.com/private-client) - [Realized Exchange Services](https://www.realized1031.com/realized-exchange-services) ### [The Company](https://www.realized1031.com/about-us) - [The Team](https://www.realized1031.com/about-us) - [FAQ](https://www.realized1031.com/frequently-asked-questions) - [Testimonials](https://www.realized1031.com/testimonials) - [Press](https://www.realized1031.com/press) - [Careers](https://www.realized1031.com/careers) ### [Partners](https://www.realized1031.com/partners) - [Financial Advisors](https://www.realized1031.com/advisor) - [Broker Dealers](https://www.realized1031.com/partners/broker-dealers) - [Real Estate Agents](https://www.realized1031.com/partners/real-estate-agents) - [Certified Public Accountants](https://www.realized1031.com/partners/certified-public-accountants) ### [Resources](https://www.realized1031.com/resources) - #### Learn - [Articles](https://www.realized1031.com/blog) - [Glossary of Terms](https://www.realized1031.com/glossary) - [Capital Gains Tax Rates](https://www.realized1031.com/capital-gains-tax-rate) - #### Watch - [Video Library](https://www.realized1031.com/videos) - [Webinar Archive](https://www.realized1031.com/webinars) - #### Read - [Delaware Statutory Trust](https://www.realized1031.com/delaware-statutory-trust) - [Tenants-In-Common](https://www.realized1031.com/tenants-in-common-tic) - [1031 Exchange](https://www.realized1031.com/1031-exchange) - [Qualified Intermediary](https://www.realized1031.com/qualified-intermediary) - [Qualified Opportunity Zones](https://www.realized1031.com/opportunity-zones) #### Realized - 500 W 13th Street Austin, TX 78701 - (877) 797-1031 ##### [Contact Us](https://www.realized1031.com/contact-us) - [![Realized on Facebook](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-facebook-whiterev.png?width=60&height=60&name=social-facebook-whiterev.png)](https://www.facebook.com/Realized/) - [![Realized on LinkedIn](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-linkedin-whiterev.png?width=60&height=60&name=social-linkedin-whiterev.png)](https://www.linkedin.com/company/realized/) - [![Realized on YouTube](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-youtube-whiterev.png?width=60&height=60&name=social-youtube-whiterev.png)](https://www.youtube.com/c/Realized1031?sub_confirmation=1) - [![Realized Holdings, Inc. BBB Business Review](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/bbb/RZH2-bbb-seal.png?width=40&height=65&name=RZH2-bbb-seal.png)](http://www.bbb.org/central-texas/business-reviews/real-estate-investors/realized-holdings-llc-in-austin-tx-1000112948/#bbbonlineclick) - [![FEA Logo](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/fea/RZH2-fea-logo.png?width=82&height=65&name=RZH2-fea-logo.png "FEA Logo")](https://www.1031.org) SECURITIES DISCLOSURE Realized1031.com is a website operated by Realized Technologies, LLC, a wholly owned subsidiary of Realized Holdings, Inc. (“Realized Holdings”). Securities and/or Investment Advisory Services may be offered through Registered Representatives or Investment Advisor Representatives of Realized Financial, Inc. ("Realized"), a broker/dealer, member [FINRA](https://www.finra.org)/[SIPC](https://www.sipc.org/), and registered investment adviser. Realized is a subsidiary of Realized Holdings, Inc. ("Realized Holdings"). Check the background of this firm on [FINRA's BrokerCheck](https://brokercheck.finra.org/firm/summary/22333). Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment. Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments are often sold by prospectus that discloses all risks, fees, and expenses. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain and should not be deemed a complete investment program. The value of the investment may fall as well as rise and investors may get back less than they invested. This site is published for residents of the United States who are accredited investors only. Registered Representatives and Investment Advisor Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all of services referenced on this site are available in every state and through every representative listed. For additional information, please contact the Realized Compliance department at 512-472-7171 or info@realized1031.com. - [Terms & Conditions](https://www.realized1031.com/terms-and-conditions) - [Privacy Policy](https://www.realized1031.com/privacy-policy) - [Form CRS](https://www.realized1031.com/hubfs/common-files/disclosures/FormCRS.pdf) - [ADV 2A](https://www.realized1031.com/hubfs/common-files/disclosures/ADV2A.pdf) - [Reg BI Disclosures](https://www.realized1031.com/hubfs/common-files/disclosures/RegBI.pdf) -   © 2026 Realized Holdings, Inc. ```json { "@context" : "http://schema.org/", "@type" : "BlogPosting", "articleBody" : "Real estate investment properties can offer many potential benefits, including important tax breaks, stable cash flows, passive income, portfolio diversification, and asset appreciation. In today’s frothy real estate market, where demand for investment properties often outstrips availability, investors may be considering divestiture of certain real property assets to capitalize on high asset appreciation. You’ll be on the hook for any realized gains above your investment basis in the asset, though, unless you complete a 1031 exchange. Real estate investors have used 1031 exchanges for decades as a means to defer capital gains taxes. Investors who sell investment assets can defer taxes on any realized gains by rolling over all of the sale proceeds into another property. Real estate rollover is unique to the 1031 exchange process and allows investors to defer capital gains, trade up in asset class and worth, and diversify their portfolios. Example of Real Estate Rollover Rollover has long been associated with individual retirement accounts. If you leave a job and you had an employer-sponsored 401(k), you can rollover or transfer the funds from that account into a new IRA without incurring any penalties or tax obligations. Real estate rollover is the heart of a 1031 exchange. Selling an investment property outright, especially one with significant asset appreciation, can generate a taxable event that erodes overall profit. Long-term capital gains taxes for assets held more than one year are either 0, 15, or 20 percent depending on your income for that tax year. If you are a single filer who will report more than $445,850 in taxable income for 2022, you’ll pay the top rate of 20 percent in capital gains taxes. Here’s the difference between selling an investment property outright versus rolling over the sale proceeds and completing a 1031 exchange, assuming a 20-percent capital gains tax: Original basis: $1 million Straight sale Asset sale price: $2 million Capital gains tax at 20%: $200,000 ($1 million @ 20%) Funds available for reinvestment: $1.8 million Original basis: $1 million Rolling proceeds over into a 1031 exchange Asset sale price: $2 million Capital gains taxes due after a 1031 exchange: $0 Funds available for reinvestment: $2 million Real estate rollover increases the purchasing power of your investment dollars and preserves your investment capital. Real Estate Rollover Property Types Real estate rollover in a 1031 exchange is limited to “like-kind” properties. The Internal Revenue Service defines like-kind real estate assets as those that are of similar nature or character, even if they are different quality or grade. Essentially, that means when you are looking for replacement properties for a real estate rollover in a 1031 exchange, you should be looking for the same kind of property – exchanging a single-family investment property for another one, or a duplex for a tri-plex or larger multi-family property. You can do a real estate rollover from a 1990s residential investment property into a newly built house (higher asset quality) or a Class C apartment complex into a newer Class A multiplex (higher asset grade). One important aspect of 1031 exchanges is that the replacement property must be held for investment purposes. You can’t rollover the sale proceeds from an older single-family investment property into a new house that you intend to live in – the replacement asset has to be a rental, at least for a period of time to make sure you can satisfy the strict exchange requirements. The Bottom Line Real estate investments offer many potential benefits for investors. Real estate rollover through a 1031 exchange can do the same by preserving more of your investment capital and allowing you to purchase assets of greater value or higher quality. Consulting with professionals experienced in 1031 exchanges can help investors learn more about the potential benefits of real estate rollover. This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation. Costs associated with a 1031 transaction may impact investor’s returns and may outweigh the tax benefits. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities. All real estate investments have the potential to lose value during the life of the investment. Examples shown are for illustrative purposes only. This illustration does not reflect any fees or expenses that may be incurred during a real estate transaction, any fees or expenses would reduce the overall funds available for reinvestment. Actual results may vary and be more or less favorable than illustrated.", "articleSection" : [ "Real Estate Investing" ], "author" : { "@type" : "Person", "email" : "marketing@realized1031.com", "image" : "", "name" : "The Realized Team", "url" : "https://www.realized1031.com/blog/author/the-realized-team" }, "dateModified" : "2022-06-02T12:00:03+0000", "datePublished" : "2022-06-02T12:00:03+0000", "description" : "Real estate rollover is unique to the 1031 exchange process and allows investors to defer capital gains, trade up in asset class and worth, and diversify their portfolios.", "headline" : "What Is a Real Estate Rollover?", "image" : { "@type" : "ImageObject", "height" : 392, "url" : "https://733513.fs1.hubspotusercontent-na1.net/hubfs/733513/rollover-881542122%20%281%29.jpg", "width" : 750 }, "mainEntityOfPage" : "https://www.realized1031.com/blog/what-is-a-real-estate-rollover", "name" : "What Is a Real Estate Rollover?", "publisher" : { "@type" : "Organization", "address" : { "@type" : "PostalAddress", "addressCountry" : "USA", "addressLocality" : "Austin", "addressRegion" : "TX", "postalCode" : "78701", "streetAddress" : "500 W 13th Street " }, "logo" : { "@type" : "ImageObject", "height" : 60, "url" : "http://www.realized1031.com/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black-No-Margin-296x60-AMP.png", "width" : 296 }, "name" : "Realized" }, "thumbnailUrl" : "https://733513.fs1.hubspotusercontent-na1.net/hubfs/733513/rollover-881542122%20%281%29.jpg" } ```