Sale
Maximum liquidity and a complete exit. Repay debt and pay disposition costs and current taxes; no property equity or debt remains.
Three strategies, three different economic outcomes
The Jessica Crest example begins with a $100 million acquisition, $60 million of interest-only debt, and a current value of $140 million after three years.
Cash-out refinancing
Liquidity without selling. Replace the old loan with a larger loan, retain the property, and generally avoid a current taxable disposition.
Section 1031 exchange
Continue the real estate investment. Move into qualifying replacement real property; cash retained as boot may create current taxable gain.
The best strategy depends on the investor's objective: liquidity, retained control, leverage, or tax deferral.
Change the assumptions
Move a slider or enter a value. All cash, equity, debt, tax, and funding comparisons update immediately.
Current investment
Acquisition basis, current value, debt, and holding period.
Disposition and tax
A simplified classroom estimate using the chapter's tax structure.
Tax and depreciation assumptions
Refinancing and exchange terms
Loan proceeds create liquidity but also leave debt outstanding.
Higher LTV reduces required replacement equity but can increase cash boot.
Most cash todaySale$69.56M available
Highest net wealthRefinancing$79.00M after costs and current tax
Lowest current taxRefinancing$0.00M estimated tax today
Where the investor's net wealth sits after each strategy
Orange is spendable cash; navy is equity still invested in real estate. Bar length is total net wealth after modeled costs and current taxes.
Cash availableRetained real estate equity
The exchange produces $41.00M of cash boot. Tax deferral is therefore partial, not complete.
Side-by-side comparison
A strategy can release cash without producing the highest total wealth or the lowest leverage.
| Outcome | Sale | Refinance | 1031 exchange |
|---|---|---|---|
| Cash today | $69.56M | $30.00M | $34.27M |
| Real estate equity retained | $0.00M | $49.00M | $35.00M |
| Estimated tax today | $7.44M | $0.00M | $6.73M |
| Debt after strategy | $0.00M | $91.00M | $105.00M |
| Net wealth | $69.56M | $79.00M | $69.27M |
| Next-project funding | +$29.56M | -$10.00M | -$5.73M |
1 · Transfer relinquished propertyExchange proceeds are held by a qualified intermediary rather than received by the investor.
2 · Identify within 45 daysIdentify qualifying replacement real property within the statutory identification period.
3 · Receive within 180 daysComplete the replacement acquisition within 180 days or the earlier applicable tax-return deadline.
Important tax-law distinction: A like-kind exchange defers gain only to the extent the transaction qualifies. Under the IRS instructions, cash or non-like-kind property received can create currently recognized gain. The tool therefore treats excess cash retained after funding the replacement acquisition as taxable boot; it does not assume that $41 million can be withdrawn tax-free. Partnership interests generally are not qualifying real property. See the IRS Instructions for Form 8824. Calculations are simplified and do not model state taxes, passive-loss rules, debt-relief details, or every Section 1031 requirement.