Welcome to Part 6 of our 1031 Exchange Blog Series. By now, you understand how a 1031 Exchange works—but the real magic happens when you use it over and over again.
Today, we’re diving into the wealth-building power of repeat 1031 Exchanges—and why investors from Bay Ridge to Billionaire’s Row use this strategy to move from modest returns to massive long-term gains.
The Compound Effect of Deferring Taxes
When you sell an investment property, you typically owe capital gains taxes—up to 20% federally, plus New York State and NYC taxes.
That means a $300,000 profit could cost you $90,000 or more in taxes.
But with a 1031 Exchange, you defer those taxes by rolling your profit into another investment property.
Now imagine doing that again and again—scaling up each time without paying taxes on the gains.
The Wall Street Journal calls this the compound effect of real estate—and it’s how investors go from:
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Duplex → 4-unit
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4-unit → 12-unit
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12-unit → Commercial or mixed-use
All while maximizing returns and minimizing tax exposure.
What Investors Are Doing in NYC
The Real Deal reports that smart investors across Brooklyn, Queens, and Manhattan are using 1031s to:
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Exit older buildings with high maintenance
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Reposition portfolios in emerging neighborhoods
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Trade up into low-vacancy, high-rent properties
Some even use 1031s to consolidate multiple small properties into one large, cash-flowing asset with professional management.
The New York Times highlights how many of these exchanges are driven not by taxes alone—but by a strategic vision for legacy wealth and income stability.
Plan for the Long Game
The key to building wealth with 1031s is to treat each move as part of a broader strategy.
Ask yourself:
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What’s the next level of asset I want to own?
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How long will I hold it?
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What’s my timeline to retire or transition?
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What kind of cash flow or appreciation do I need?
At Pen Realty, I help clients map out these decisions so their real estate isn’t just growing—it’s growing intentionally.
Example: A Brooklyn Investor’s Wealth Ladder
Let’s say you purchased a 2-family home in Sunset Park for $950K five years ago.
It’s now worth $1.4M.
Instead of selling and losing $100K+ to taxes, you:
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Use a 1031 Exchange to purchase a 4-unit building in Bay Ridge
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Build equity while deferring taxes
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Exchange again into an 8-unit property in Windsor Terrace
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Keep scaling, with each step building more cash flow and more equity
Let’s Build Your 1031 Game Plan
Whether you're on your first exchange or your fifth, I can help you design a smart reinvestment strategy that supports your financial goals.
📧 Email: [email protected]
📞 Call/Text: 917.916.5126
▶️ Watch the full vlog series: @pmpenrealty
👉 Next up: Can You Exchange into New Construction? Yes—If You Follow These Rules.
