"Swap Until You Drop" Isn't Always the Best Strategy

"Swap until you drop"

It's a common saying among real estate investors. 

The idea is straightforward:

Continue exchanging investment properties through a series of 1031 exchanges, defer capital gains taxes along the way, and ultimately receive a step-up in basis at death, potentially avoiding capital gains taxes altogether.

It’s a great strategy…in theory. 

In practice, I’ve found it rarely plays out.

I’ve seen it reported that fewer than ~12% of 1031 exchanges ultimately make it all the way to an owner’s death.

Life happens. 

Death, divorce, and disability happen. 

People get tired of managing properties. 

The next generation may have no interest.

A property that was a great investment 25 years ago may no longer fit your goals today.

Sometimes cash and liquidity become more valuable than deferring capital gains taxes.

A 1031 is an incredibly powerful wealth-building tool.

But it shouldn’t become the sole objective. 

Sometimes the best decision is another 1031 exchange. 

Sometimes it’s paying the tax and moving on.