01
Management Burden
Apartment ownership means tenants, turnover, maintenance, and ongoing capital expenditures. Many owners approach retirement ready to exit the landlord role without giving up real estate income entirely.
Multifamily & Apartment Owners
You've built the wealth. Selling shouldn't give most of it back.
Apartment and multifamily property owners who have held their buildings for years often face a significant tax bill when they sell — capital gains, depreciation recapture, and potentially state taxes on top. A 1031 exchange may allow you to defer those taxes and transition to a different type of real estate ownership. Whether that's the right path depends on your goals, your tax position, and what you want the next chapter to look like.
Potential tax exposure at sale — illustrative only
Multifamily investors may face multiple layers of tax on the same gain.
20%
Federal long-term capital gains (may apply at top rate)
25%
Depreciation recapture (on depreciation taken)
3.8%
Net Investment Income Tax (if above thresholds)
+State
State capital gains tax where applicable
Illustrative only. Actual rates depend on income, state, holding period, and individual tax situation. Consult your CPA for an estimate specific to your situation. Tax rates based on current law and subject to change.
Common Challenges
Why multifamily owners come to us
These are the situations that typically bring multifamily investors to a planning conversation — often after something finally prompts the decision to sell.
02
Large Embedded Gain
Long-held multifamily properties often carry significant appreciation and accumulated depreciation. Selling without a plan can trigger a tax bill that represents a substantial portion of the total sale price.
03
Concentrated Wealth
Your net worth may be heavily tied to one or two properties. Selling outright solves the concentration problem but may create a large taxable event. A 1031 exchange may allow repositioning without triggering the full tax liability.
04
Capital Expenditure Pressure
Aging roofs, mechanical systems, and unit renovations are expensive. Many multifamily owners sell specifically to stop funding large capital projects — and want to know whether there's a tax-efficient way to do it.
05
The 45-Day Identification Window
In a competitive market, finding suitable replacement property within 45 calendar days of closing is difficult. Delaware Statutory Trusts are often used specifically because they close quickly and sidestep the search problem.
06
Estate Planning Complexity
What happens to appreciated multifamily property when the owner passes? Planning how the property — or the gain — transfers to heirs is important, and the options are more flexible when planning starts early.
Why Planning Early Matters
The decisions that matter most happen before you list
Once a multifamily property closes without a plan in place, options narrow considerably. Here is what changes when planning starts early.
Tax Planning
Know Your Actual Exposure
Many owners don't have a clear picture of their combined capital gains, depreciation recapture, and state tax liability until they work through the numbers. Early planning removes that surprise.
Exchange Timing
Preserve Your Options
A qualified intermediary must be engaged before closing. The 45-day identification window starts the moment you close. Early planning means these requirements don't catch you unprepared.
Coordination
Align Your Full Team
Your CPA, attorney, qualified intermediary, and investment adviser all play a role in a 1031 exchange. Coordinating them before the transaction — not during it — produces better outcomes.
Clarity
Decide Without Pressure
Investors who plan 6–18 months ahead make decisions without deadlines forcing their hand. Investors who call after signing a purchase agreement are often working against the clock.
How We Work
How Insight works with multifamily investors
1
Understand your property and your goals
A complimentary call to discuss your building, your approximate tax position, your timeline, and what you want from the next phase. No product discussion on the first call.
2
Estimate your real tax exposure
Working with your CPA, we develop a clearer picture of your combined capital gains, depreciation recapture, Net Investment Income Tax, and state tax liability. Investors are frequently surprised by the combined figure.
3
Evaluate all paths — not just DSTs
We outline the options: sell outright, direct 1031 replacement property, DST as replacement property, or other approaches. We present the honest tradeoffs of each before any recommendation.
4
If a DST — evaluate offerings together
If a DST is appropriate, we review available offerings with you — sponsor track record, property type, debt structure, projected hold period, and fees. We help you ask the right questions and understand the full PPM.
5
Coordinate the exchange with your full team
We work with your CPA, attorney, and qualified intermediary to ensure the exchange is structured correctly, the timeline is met, and all parties are aligned before closing.
Free Resource
The Retiring Landlord's Playbook
A plain-language guide to your options when selling rental or multifamily property — capital gains taxes, 1031 exchange rules, DST basics, and how to think through the decision before signing anything.
- Understanding your combined tax exposure before listing
- How a 1031 exchange works — and when it may not make sense
- What a DST is, how it works, and what the risks are
- The 45-day and 180-day rules explained in plain terms
- When to sell outright and when not to
- Questions to ask any adviser before proceeding
This guide is for general educational purposes only. It does not constitute investment, tax, or legal advice. Consult your CPA and legal counsel before making any investment decisions.
Download the free guide
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Frequently Asked Questions
Questions multifamily investors ask most
Yes. Apartment buildings and multifamily properties held for investment generally qualify as like-kind real estate in a 1031 exchange. The proceeds can be reinvested in other multifamily properties, commercial real estate, or interests in a Delaware Statutory Trust. The same 45-day identification and 180-day closing deadlines apply, and a qualified intermediary must be engaged before the sale closes.
When selling an apartment building, investors may face federal long-term capital gains tax on the appreciation, depreciation recapture on any depreciation taken during ownership (up to 25%), the Net Investment Income Tax of 3.8% if above income thresholds, and state capital gains tax where applicable. The combined tax burden can be significant — often larger than investors anticipate, particularly given the depreciation recapture component.
Consult your CPA for an estimate specific to your situation. Tax rates are based on current law and subject to change.
Under IRS Revenue Ruling 2004-86, properly structured DST interests may qualify as like-kind replacement property in a 1031 exchange. This allows multifamily investors to potentially defer capital gains and depreciation recapture taxes while exiting active property management. DSTs are illiquid, involve real estate and sponsor risk, are generally available only to accredited investors, and can result in loss of principal. Consult your investment adviser, CPA, and qualified intermediary before proceeding.
Depreciation recapture taxes the gain attributable to depreciation deductions you took during ownership at a rate of up to 25%. For long-term apartment owners who have taken significant depreciation over many years, this is often a larger and more surprising component of the total tax bill than the capital gains themselves. A 1031 exchange may allow deferral of depreciation recapture along with capital gains taxes.
The earlier the better — ideally 6 to 18 months before a planned listing. Investors who plan early have time to understand their full tax exposure, evaluate all available paths, engage a qualified intermediary before closing, and make considered decisions without deadline pressure. Investors who contact us after accepting a purchase offer are working against the 45-day identification and 180-day closing windows from the moment they close.
Next Step
Talk before you list.
Talk before you list.
Not after.
The planning conversations that matter most happen before a purchase agreement is signed. A 30-minute call before you list may change how you approach the entire transaction — and cost you nothing.
No obligation · No cost · Registered Investment Adviser
This page is for general educational purposes only and does not constitute investment, tax, or legal advice. 1031 exchanges involve strict rules and deadlines. DST investments are illiquid, involve real estate and sponsor risk, may not be suitable for all investors, and can result in loss of principal. DSTs are generally available only to accredited investors. Tax outcomes depend on individual circumstances and applicable law, which is subject to change. Consult your CPA and legal counsel before making any decisions. Insight Investment Advisers is a Registered Investment Adviser.
