NYC Landlords: Reduce Capital Gains & Reinvest Using a 1031 Exchange

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Co-written by Andrew Feldman, PC.

Are you a property owner that wants to sell their condo, investment property or needs to rent an apartment or retail space in New York City? Call or text me: Sam Moritz, licensed real estate agent, 203–209–3640.

Do you know a property owner that might need real estate help? Refer me! I provide great and professional real estate services across all five boroughs.

If you’re a New York City multifamily owner thinking about selling, one of your biggest concerns is likely capital gains taxes. Many landlords hear phrases like 1031 exchange and capital gains deferral — but aren’t sure how these strategies really work when selling property in NYC.

Recently, I spoke with a landlord in Bushwick who wanted to sell his building and reinvest closer to his home in New Jersey. His questions were common:

  • Can I buy out-of-state with a 1031 exchange?
  • Do I need to buy another multifamily building?
  • What if I want something lower-maintenance?
  • What happens if the replacement property costs less?

What NYC Multifamily Owners Should Know About 1031 Exchanges

A 1031 exchange allows you to defer capital gains taxes by selling one investment property and purchasing another “like-kind” property. For many NYC landlords, it’s a powerful way to preserve wealth and reinvest proceeds rather than paying a large tax bill upfront.

To help clarify common misconceptions, I recently spoke with Andrew Feldman, Esq., a New York attorney who has handled 1031 transactions for nearly four decades.

Can I Buy Property Out-of-State?

Yes. You can sell NYC real estate and purchase qualifying property anywhere in the U.S.

What Types of Property Qualify?

Eligible exchange options include:

  • NYC apartment buildings or mixed-use properties
  • Out-of-state multifamily buildings or rental homes
  • Condos (held exclusively as rentals)
  • Triple-net-lease commercial properties (e.g., Starbucks, 7-Eleven)
  • Shopping centers and commercial assets

Triple-net (NNN) properties can significantly reduce management responsibility — but often come with slightly lower returns versus multifamily ownership.

Looking for Passive Income Instead of Landlord Duties?

If you’re ready to step away from hands-on management, a Delaware Statutory Trust (DST) may be an option. A DST allows investors to own fractional interests in professionally managed real estate — truly passive income.

Keep in mind: DSTs typically involve fees and may offer lower returns than direct ownership.

Key 1031 Exchange Deadlines

  • 45 days to identify replacement properties
  • 180 days to complete the purchase
  • Proceeds must be held by a qualified intermediary

These deadlines are strict with no extensions.

Mortgage Rules & “Boot”

If your property has a mortgage, your replacement property usually must carry equal or greater debt. Otherwise, the difference may be considered taxable income (“boot”).

When Paying Capital Gains Might Still Make Sense

In some situations — especially after major appreciation — paying capital gains and reallocating into other investments (e.g., equities) can still be a smart strategy. The best choice depends on your financial goals and lifestyle.

Thinking About Selling Your NYC Multifamily Property?

Selling an NYC investment property is a major decision. Understanding 1031 exchange strategies empowers you to reinvest wisely — whether you’re acquiring another building in NYC, moving capital out-of-state, or transitioning into passive real estate.

If you’re considering selling your building or exploring a 1031 exchange, I’m here to help.

📞 Call me: 203-209-3640
NYC Multifamily Specialist | 8 Years Experience
EXR Real Estate

If you need legal support, contact:
Andrew Feldman, Esq.
📞 516-747-2828 | ✉️ Andrew@Feldman114.com

Are you a property owner that wants to sell their condo, investment property or needs to rent an apartment or retail space in New York City? Call or text me: Sam Moritz, licensed real estate agent, 203–209–3640.

Do you know a property owner that might need real estate help? Refer me! I provide great and professional real estate services across all five boroughs.

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