Three ways to sell an investment property, and what each one costs

Selling a property that has appreciated and been depreciated triggers two separate bills: capital gain on the appreciation and recapture on the depreciation. There are three common ways to handle that, and they are not ranked. Paying it is the option nobody presents and it is sometimes correct. It ends the matter, frees the proceeds for anything at all, and costs nothing in structure or deadlines. An investor who wants out of real estate entirely, or who needs the cash for something else, is not helped by a deferral that forces them back into property on a 45-day clock. A 1031 exchange defers both, provided the proceeds go into replacement investment property inside the statutory deadlines and never touch the seller's hands. It is the strongest tool available for someone who is definitely buying again, and the worst one for someone who might not be: missing the identification window turns a plan into a fully taxable sale with the money already spent on fees. An installment sale spreads the gain across the years payments are received, which can keep the seller in lower brackets. Depreciation recapture, though, is generally recognised in the year of sale regardless — so a heavily depreciated property gets less benefit than expected. And the seller is now a lender, with the credit risk that implies. The decision is not about minimising this year's tax. It is about what the money is for. Run the three side by side with a CPA before the property is listed, because after a contract is signed the 1031 route requires steps that must already be in motion. This article is general information, not legal, tax or financial advice. Rules change and every deal is different — check your own case with a licensed professional. Alberto Zaltzberg — Adonait · adonait.com