Real estate investing offers a lucrative way to build wealth, but it also comes with tax obligations. One useful tool investors can use to defer capital gains taxes is the 1031 exchange. This tax-deferral strategy allows investors to sell one property and buy another one without having to pay capital gains taxes immediately on the profit. If you’re a real estate investor looking to grow your portfolio while deferring your taxes, understanding how a 1031 exchange works is crucial.