Strategy brief
Replacement Property: Look Beyond the Purchase Price
A property can satisfy a value target and still weaken the investor's long-term position. Compare the whole capital structure before treating a candidate as the answer.
Separate qualification from quality
A replacement candidate may be real property held for investment or business use and still be a poor acquisition. Section 1031 eligibility asks one set of questions. Operating risk, concentration, financing, liquidity, and management demands ask another.
Keep both reviews visible. The urgency of an exchange should not turn a tax-deferral objective into an automatic approval of the underlying real estate.
Model the full capital stack
Review expected equity, replacement debt, lender costs, closing adjustments, immediate capital needs, and prudent reserves. A headline purchase price can conceal a very different amount of cash committed at closing and during the first year of ownership.
If multiple properties are being considered, use consistent assumptions so the comparison is not distorted by different reserve policies or optimistic expense estimates.
Carryover basis changes the future view
In a qualifying like-kind exchange, the basis of the replacement property is generally connected to the basis of the relinquished property, subject to adjustments. That can affect depreciation after the exchange and the gain calculation on a later taxable disposition.
Ask the tax advisor to model the replacement basis and expected depreciation rather than treating the exchange as a permanent end to the tax analysis.
Score the post-close reality
The useful question is not only whether the property can close by Day 180. It is whether the ownership experience fits the investor's objectives: income stability, tenant exposure, capital work, geographic concentration, decision rights, and exit flexibility.
Brandon's role is to bring the exchange economics and CPA perspective into that decision process, with Qualified Intermediary coordination through i1031. Investment selection, legal review, and transaction-specific tax advice remain separate professional decisions.