...well not exactly tax free, but tax deferred at least.  Earlier in the year I mentioned a resolution that I'd declared for myself - to sell a high-end property that had built some equity via appreciation and re-invest in a multi-family via a 1031 tax deferred exchange. 

Here's a quick overview of how a 1031 works. 

A 1031 is an IRS code that allows investors to build wealth by exchanging properties while deferring taxes.  Any property may be exchanged for a "like kind" property.  Most real estate transactions fit this definition.  A rental property, for example, could be exchanged for a commercial or farm property. 

You'll need a "qualified intermediary" in order to execute a 1031 exchange.  In lay terms:  when you sell the property you're not allowed to touch the cash, otherwise the tax man is going to come knocking. 

When you sell the property, title is transferred to the buyer via the intermediary, and the proceeds of the sale are delivered to the intermediary.  At this point you have 45 days to identify replacement properties.  Within 180 days of the original closing you'll have to close on the purchase that you're making to complete the exchange.  

Here's the key: 45 days will go by like a flash.  If you haven't started the process of identifying the replacement property or properties before you close the sale of the property that you're relinquishing then you might find yourself in a squeeze. 

I'll talk a bit more about this in the near future....and discuss a project that I now find myself in the middle of.