The simplest exit: sell the property, pay the tax, take the cash. Tax math: capital gains on (sale price - cost basis - depreciation) at long-term capital gains rate (15-20% federal + state) PLUS depreciation recapture (25% federal + state) on accumulated depreciation.

When this fits: small balances where 1031 transaction cost outweighs tax savings. Property in a market you no longer believe in. Cash needed for non-real-estate use (business, health, education).

Don't default to selling at the first chance. The tax bite on a long-held property can be 25-35% of equity. Run the math before listing.

Sell the relinquished property and reinvest the proceeds into "like-kind" replacement property within 180 days, deferring capital gains and depreciation recapture. The deferred tax stays deferred until you eventually sell out of the cycle.

Strict timeline: 45 days to identify replacement, 180 days to close. Use a Qualified Intermediary to hold the proceeds - if you touch the money, the exchange invalidates.

When this fits: you want to keep capital deployed in real estate. You want to upgrade (smaller properties → larger), consolidate (multiple → one), or change market (declining → growing).

Trap: failed exchanges (couldn't find suitable replacement in 45 days) flip into immediate tax liability. Identify replacements before listing the relinquished property.

Instead of selling, refinance the property and pull out equity in cash. The cash comes out tax-free (loan proceeds aren't taxable income). The property continues generating rental cash flow.

Math example: $400K property, $200K basis, $150K mortgage. Cash-out refi to 75% LTV = $300K loan. You receive $300K - $150K (existing payoff) = $150K cash, tax-free. Property continues to cash-flow.

When this fits: long-term holders who want to access equity without triggering tax. Funding the next acquisition. Diversifying out of one market into another (use cash to buy elsewhere, keep the original).

Trade-off: higher loan balance, smaller monthly cash flow. The property must still cash-flow after the refi. And refinance closing costs (typically $5-15K) are real.

The "buy and never sell" strategy: hold the property through your lifetime, let heirs inherit. Under current US tax law, inherited property gets a "stepped-up basis" - the heir's cost basis becomes the fair market value at date of death. Decades of accumulated capital gains and depreciation recapture are erased.

Math example: $200K original cost, $1M value at death. Without step-up, $800K gain triggers $200K+ in tax at sale. With step-up, basis becomes $1M; heir can sell with no gain.

When this fits: long-term wealth transfer to family. Properties in markets you believe in for 20+ years. Holdings that produce strong cash flow without need for liquidation.

Caveat: step-up basis is subject to political risk - tax law changes could eliminate or modify it. Discuss with an estate attorney for current planning.

Most successful investors combine strategies across their portfolio. Cash-out refinance the prime properties to access equity. 1031 exchange the underperformers to consolidate. Hold the legacy properties for step-up. Sell the smallest balances where transaction cost beats tax deferral.

A 50-property portfolio might have 30 holds, 10 cash-out refinanced for capital recycling, 8 in active 1031 sequences, and 2 sold outright per year. The mix evolves with your goals (capital deployment, liquidity, estate planning).