1031 Exchange for Los Angeles Apartment Buildings
We sell your building at maximum value and find your replacement property. Your QI handles the paperwork. Your CPA handles the taxes. We handle the deal.
100+
Exchanges Facilitated
85%
Avg Cash Flow Increase
How a 1031 Exchange Works
Under IRC Section 1031, you can sell investment real estate and defer all capital gains taxes by reinvesting the proceeds into like-kind replacement property. The IRS defines like-kind broadly: an apartment building qualifies for exchange into another apartment, a single-tenant NNN property, raw land, or a Delaware Statutory Trust (DST).
Day 0
Your building sells and closes
Day 1 – 45
Identify up to 3 replacement properties
Day 1 – 180
Close on replacement property
Both deadlines are absolute and cannot be extended for any reason, including weekends, holidays, or market conditions. Missing either deadline converts the entire transaction into a taxable sale. That is why we start sourcing replacement properties before your building even goes to market.
Exchange Requirements
- A Qualified Intermediary (QI)must hold proceeds — you cannot touch the funds
- Replacement property must be equal or greater in value to defer all gains
- Must reinvest all net equity(any cash taken out, called “boot,” is taxable)
- Title must be held in the same entity that sold the relinquished property
The Tax Hit Without a 1031 Exchange
Capital gains on LA apartment building sales can be devastating. Here is what you could owe on a typical sale:
| Tax Type | Rate | On $1M Gain |
|---|---|---|
| Federal Capital Gains (long-term) | 20% | $200,000 |
| California State Capital Gains | 13.3% | $133,000 |
| Federal Depreciation Recapture | 25% | Varies |
| Net Investment Income Tax (NIIT) | 3.8% | $38,000 |
| Total Before Depreciation Recapture | $371,000+ |
Measure ULA Warning:Los Angeles' transfer tax (4% on sales $5.3M–$10.6M, 5.5% on $10.6M+; thresholds CPI-indexed) is not deferredin a 1031 exchange. You still owe ULA even if you exchange. But federal and state capital gains, depreciation recapture, and NIIT — which dwarf ULA — are fully deferred. Read our full ULA guide →
What You Can Exchange Into
Based on 100+ exchanges, our clients choose one of three replacement strategies:
60%
NNN Properties
Walgreens, Dollar General, Dutch Bros — passive income with corporate-backed leases. No tenants, no toilets, no management. Average +55% cash flow increase.
25%
Out-of-State Apts
Trade LA's 4% cap for 6–8% in Texas, Arizona, or the Midwest. No rent control, no state income tax. Average +97% cash flow increase.
15%
DSTs
Fractional ownership in institutional real estate. 100% passive, $100K minimum. Average +187% cash flow increase. Ideal for retirement.
1031 Exchange Case Studies
Real exchanges we facilitated for LA apartment building owners — with before and after cash flow.
10 Units in Manhattan Beach → NNN Caliber Collision in Texas
Apartments to NNN | Partnership Dissolution
Partners wanted out of management after decades. Exchanged into a 15-year corporate-backed Caliber Collision lease — no management, no tenants, no maintenance. New depreciation schedule restarted their tax clock.
Duplex in Toluca Lake → 3 DSTs Across 4 States
Apartments to DST | Retirement Exchange
Rent-controlled duplex with deferred maintenance. Seller exchanged into three DSTs across mineral rights, industrial, and self-storage — spread between three sponsors in four states. Completed the entire exchange in under 45 days. Now 100% passive with zero management.
18 Units in Van Nuys → 4 Dollar General Locations in Arkansas
Apartments to NNN Portfolio | Rent Control Escape
Owner was tired of LA rent control changes and management headaches. Exchanged into four brand-new Dollar General stores, each with 15-year corporate leases. Doubled monthly income with zero landlord responsibilities.
4 Units in Monrovia → 33 Units in Cincinnati
Apartments to Out-of-State Apartments | Growth Exchange
Traded a 4-unit building with deferred maintenance and below-market rents for a fully updated 33-unit property in Cincinnati with professional management in place. Secured a 3.7% interest rate with one year of interest-only payments. Went from 4 units to 33 units with 3.5x the monthly income.
Office Building in Pasadena → 127-Property DST Portfolio
Office to DST | $12M Exchange | Retirement
Retiring owner sold a Pasadena office building for $12.5M and exchanged the full $12M in equity into an ExchangeRight DST portfolio of 127 net-leased properties nationwide. More than doubled cash flow with completely passive, professionally managed, diversified ownership.
5 Units in Panorama City → 13 Units in Northridge → 66 Units in Des Moines
Three Exchanges Over 5 Years | Serial Exchanger
Starting with a $585K 5-unit in Panorama City, this client exchanged into a 13-unit in Northridge (selling for $2.1M two years later), then into a 66-unit in Des Moines via a Fannie Mae loan through MMCC. Cash flow went from $1,331/month to $6,540/month. Eventually sold the Des Moines property for $5.275M. Three exchanges, one decade, 800%+ total return.
The LAAA 1031 Exchange Process
We do not just sell your building and wish you luck finding a replacement. We manage the entire exchange from start to finish.
We assess your building's market value, model your tax exposure, and discuss replacement goals: passive income? more units? out of state? We tailor the strategy to your situation.
We bring 455+ transactions of pricing expertise and a buyer database of 24,000+ investors. Average 16 days to accepted offer.
While your building is in escrow, we are already identifying replacement options. NNN, DST, out-of-state — we work our network of 1,800+ Marcus & Millichap advisors nationwide.
Your QI holds the proceeds. The 45-day and 180-day clocks start. Because we sourced options during escrow, you already have identified properties ready to go.
We coordinate with the selling broker, lender, QI, and escrow to close the exchange. For DST exchanges, we work directly with sponsors to ensure seamless documentation.
New depreciation schedule, property management referrals, ongoing portfolio consultation. Many of our exchange clients come back for a second or third exchange.
LA-Specific 1031 Exchange Issues
Escaping Rent Control via 1031 Exchange
If you own an RSO or AB 1482 building in Los Angeles, a 1031 exchange lets you trade into a non-rent-controlled market — Texas, Arizona, Tennessee, or even newer construction in LA that is exempt from RSO. Your equity is preserved, your tax is deferred, and your management burden drops dramatically.
Measure ULA and 1031 Exchanges
Los Angeles' Measure ULA imposes a 4% transfer tax on sales between $5.3M–$10.6M and 5.5% on sales above $10.6M (thresholds CPI-indexed annually). ULA is not deferred in a 1031 exchange — you pay it regardless. However, the federal and state capital gains, depreciation recapture, and NIIT that a 1031 defers are typically 5–10x larger than ULA.
Partnership and LLC Exchanges
If your building is held in an LLC or partnership, the entity that sells must be the entity that buys the replacement property. Partners who want to go separate directions can use a tenancy-in-common (TIC) structure or drop-and-swap strategy — but this must be planned well in advance of closing.
Reverse Exchanges
Found the perfect replacement before your building sells? A reverse exchange lets you acquire first and sell second. An Exchange Accommodation Titleholder (EAT) holds the replacement property while you sell. Costs are $15,000–$25,000 in intermediary fees, but it eliminates the 45-day identification deadline entirely.
1031 Exchange FAQs
Planning to Sell Your LA Apartment Building?
Let's talk about your exchange options \u2014 before you list. Complimentary, confidential consultations \u2014 no obligation.
16830 Ventura Blvd, Ste. 100, Encino, CA 91436 | (818) 212-2808