The tax code specifies:
"No gain or loss shall be recognized on the exchange of property held for productive use in a trade or business or for investment purposes if such property is exchanged solely for property of a like-kind which is to be held for either productive use in trade or business or for investment purposes."

In other words, if a §1031 exchange is properly structured, an investor can use funds that would normally be paid in capital gains taxes to invest in new property!

By using a 1031 exchange, the investor can periodically upgrade his investment strategy by acquiring properties that best suit his needs at any given time.

The "like-kind" definition applies to nearly any type of investment property. An investor may choose to exchange out of a high maintenance apartment complex into vacant land. Or, if relocating his personal residence, the investor may also wish to relocate his investment properties. The possibilities are as endless as there are people and properties!