November, 2025

Is a 1031 exchange worth the effort and risk?

I plan to sell a property that I bought as a 1031 exchange. It will be sold with a capital gain – if the market doesn’t collapse. Then I’ll invest the equity in another property, my replacement property. I won’t owe any taxes on those gains in this transaction.

However, for the replacement property, my basis will be lower than my full investment. That means a couple of things. One, when I go to sell that property a few years from now, the capital gain will include the deferred gains from selling the property I own today, as well as the (hopefully) capital gain from selling that replacement property. My taxable gain will be higher than my actual gain from the sale of that property.

And two, the bonus depreciation that I crave will be reduced because my basis is lower. I’m less able to shelter other income so my tax bracket might be higher.

And three, I run the risk of not finding a replacement property under those crazy 1031 rules in time.

Then crash, my 1031 is busted and I owe capital gains taxes. Possibly a lot. Actually, I wouldn’t let this happen because there’s a plethora of other options, including Delaware Statutory Trusts. They will take my 1031 money but those options substantially limit income and growth.

I have my CPA guiding me in this decision because I’m no expert, but I have enough of an understanding that I know what kind of advice I need. This is my disclaimer too. I’m not an accountant, this is not advice, and I can’t even say it’s completely accurate.

But it’s close enough to the truth that I can say it’s very likely a problem that others need to solve too. That’s why I’m sharing it.

It is also a metaphor for complex problems in general, and not just real estate. You get advice from experts through social media about how something is pretty simple to do and you go out and do it. You don’t take the time to learn what all is going on but you trust your information source.

You can’t do that.

Educate yourself. At least so you know when you need expert advice. “Flying by the seat of your pants” is a phrase that started with the first pilots, when there were no other experts. Today there are experts. Use them.

Market update

Fort Wayne, IN – I’ve long been more favorable toward southern cities when it comes to real estate investing, but you can’t ignore the success many northern tier cities have seen. They aren’t hostile to business, they aren’t stagnant, and their workforce isn’t necessarily untrained or entitled. That fits Fort Wayne.

Its population of 273,000 had been growing about 8% since 2000 – that’s 8% total, not per year, until around 4-5 years ago, and has been growing over 4% annually since then. Feels like an emerging market.

Jobs growth has also been somewhat anemic over the last three years, under 1% year over year. That’s a lagging indicator, though, and we’ll likely see increases reflected in the numbers before too long. The crime rate has been declining over the last 10 years, according to city-data.com. Some uninspiring news and some good news.

But look at rent growth. Over 6% for the last year. That’s incredibly high, when most markets in the U.S. have seen zero or negative rent growth.

You can attribute that to several factors. First is that this city enjoys a relatively low cost of living. While median household income has shot up over 60% in the last 25 years to $57,000 and home values up 172% to $200,000, median rents remain low at $948 and the cost of living index is 83. That’s under the U.S. average of 100.

Another is metro growth. It’s not yet reflected in many of the national reporting statistics but LinkedIn News calls out Fort Wayne as one of the 25 fastest growing metros in the U.S. Google is building a $2B data center in Fort Wayne and bringing its “Skilled Trades and Readiness” program to Fort Wayne. That’s a huge deal.

Not far away in northern Indiana, Amazon is investing $11B in construction of a data center, and Meta is investing $800M in a data center. Data centers are going up all over the U.S. so it’s especially interesting when one region, the northern Indiana area around Fort Wayne, is so successful in attracting the major players. More will come.

Fort Wayne’s legacy manufacturing base is still going strong and growing, as manufacturing represents the biggest share of employment. If you think the tariffs are going to pull manufacturing onshore, the places best suited to benefit include established manufacturing bases. Like Fort Wayne.

Add to that Indiana’s inviting business climate and you’re going to see more wealth building through real estate in Fort Wayne.

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Finer Points of Multifamily Properties

When do I need coaching
So you wanna coach? Why’s that? Are you struggling? Hit some roadblocks? Not getting motivated and need some friendly encouragement?

Yes a real estate coach can help you with those things, but those shouldn’t be the reason for getting a coach.

A little mini-lecture on coaches first. They can be there to answer questions, they can be there to help you through a struggle, you can bounce ideas off of them, they can find the holes in your plans, and they can make introductions and recommendations. You have to decide what you need them for.

A coach is a third or fourth stage investment in your education. Not first stage, and this is a common and expensive mistake. If you’re thinking of going into real estate and you go to a weekend conference hosted by someone who coaches, you’ll get offered the coaching deal at a discount. You’ll be very excited and absolutely convinced this is something you can do.

Don’t do it.

Coaching is for those who have taken significant steps first. You should have bought something before you hire a coach, at least bought education packages or substantive training. Not a two-hour Youtube. By the time you bought the training, you should have decided that this is the direction you want to go for now. Not necessarily a permanent decision, but an informed one.

Wholesaling, fixing and flipping, small multifamily, syndicating, self storage, mobile home parks. Whatever. Make a choice and get training for that. If you don’t like it, choose a different one and buy training for that. You can’t have too much training but you can spend too much time getting trained, so be careful of that.

For me, training taught me how to look for the right market, how to value multifamily, how to underwrite, how to call brokers and negotiate purchases, how to find partners and network, all very important things.

Then I started doing those things I learned in training. I called brokers, underwrote deals, put in offers. Not perfect at first and made mistakes, but also made progress. I also made friends in real estate with people who would take my calls, and asked them how to get past certain challenges. These were people who owned a lot of real estate but they were also CRE brokers, mortgage brokers, property managers and others in the industry who wanted my business. Learn from them, share with them, and hire them wherever possible.

That’s your first stage. Your second stage is to own and operate some kind of real estate. Maybe on your own, maybe with a partner, maybe in a syndication. You have to develop your experiences.

Now you’re at the third stage and you are ready for a coach. “When the student is ready, the teacher will appear” goes the Chinese proverb.

This is so critically important because good coaches cost $20,000 or more. If you think spending $20,000 on a coach when you are just starting out will motivate you to work harder, you’re wrong. Some do get a lot out of it but most don’t. There are plenty of better places to spend $20,000 when you’re just starting out, and there are many other free or inexpensive sources of information to help you start.

When you decide you’re ready, be clear about what you want from a coach. Some coaches do only a scheduled 30 minute call once a week, others are okay getting called any time. Some might call their friends to recommend your deal to them, others would not. Some have a good track record of making millionaires, others only have shares of a few hundred units and weren’t the principal drivers.

Be sure to carve out time. If you’re just starting out and decided (against my advice!) to get coaching, be sure you have figured out where to find time. Before you head to your job, mid-morning, evenings, weekends. Don’t wait to carve out that time. You need time in the day to make calls, a lot of them, and you need time to do your analysis, when you’re not at work.

Once you’ve hired your coach, and then you aren’t doing your homework, putting in the time, showing results, your coach will see that and will become a little less committed to you. Don’t let that happen.

I have lots of coaching stories! Reach out, set up time and let’s talk about them.

“The key to coaching is love. It’s not knowledge; it’s not discipline. If you love ’em, you can discipline them. If you love ’em, you can yell at them and laugh about it later.”

― Dabo Swinney, Head Coach, Clemson Tigers Football

Who We Are
Cardinal Oak Investments acquires, improves, and manages under-valued commercial apartments.

We buy B and C class properties of around 100 units in the Southeast and Midwest.
We look for properties whose amenities, aesthetics, and appeal have fallen into obsolescence, whose care reflects tired management, and whose location is where a stable workforce wants to live.

And we partner with like-minded investors looking for stable assets that produce good cash flow and strong appreciation.