What Is a 1031 Exchange, and Why Now?
A 1031 exchange lets you sell one investment property and defer capital gains taxes by reinvesting in another “like-kind” property. It’s a powerful tool for building long-term wealth, optimizing your portfolio, and scaling into more strategic assets.
Here’s why 2025 is a great time to consider it:
- San Jose’s market is stabilizing, with new inventory hitting the market post-pandemic.
- Interest in passive income (like NNN investments) is rising as investors seek less management-intensive options.
- Many multifamily and retail owners are ready to cash in on years of appreciation and reposition their portfolios.
Top 5 Properties to Consider for a 1031 Exchange in 2025
1. NNN Retail Spaces with Long-Term Leases
NNN (Triple Net) leased properties are a favorite among investors looking for minimal landlord responsibility. Think Starbucks, CVS, or fast-casual chains where the tenant handles taxes, insurance, and maintenance.
Why it’s great for a 1031:
- Predictable income
- Low overhead
- National tenants with credit backing
- San Jose’s strong retail corridors (like Stevens Creek Blvd or Blossom Hill Rd) offer attractive cap rates.
2. Multi-Tenant Industrial Parks
As e-commerce continues to boom, light industrial properties remain in high demand. San Jose’s supply chain infrastructure and central location make it a strong bet.
Why it’s great for a 1031:
- Diverse income from multiple tenants
- Lower vacancy risk
- Increasing demand from logistics and manufacturing firms
- Opportunity to add value through minor improvements
3. Medical Office Buildings
Healthcare demand is steady, even in economic downturns. Properties leased to dentists, urgent care centers, or specialty providers tend to attract stable tenants.
Why it’s great for a 1031:
- Recession-resistant asset class
- Long-term leases with annual escalations
- High tenant retention
- San Jose’s aging population means a growing demand for medical services
4. Mixed-Use Properties in Transit-Oriented Areas
Think retail + apartments near VTA light rail or Caltrain. These properties benefit from walkability and strong tenant demand.
Why it’s great for a 1031:
- Multiple income streams
- Potential for redevelopment or repositioning
- Long-term upside from urban growth and rezoning in San Jose
- Ideal for investors seeking moderate involvement
5. Boutique Hotels or Hospitality Properties
While this category requires more due diligence, certain well-located hospitality assets are making a comeback, especially in business-travel zones.
Why it’s great for a 1031:
- High upside potential
- Opportunity to convert to multifamily or co-living spaces
- San Jose’s tech-driven travel sector is recovering faster than other cities
- Unique option for investors seeking diversification
Pro Tips for a Successful 1031 Exchange in 2025
Work with a Qualified Intermediary (QI)
You’ll need a QI to legally hold your funds between the sale and purchase. We can connect you with trusted partners.
Mind the 45/180 Rule
You have 45 days to identify new properties and 180 days to close after selling. Plan early.
Underwrite Carefully
Not all “like-kind” properties are created equal. Focus on tenant quality, location, lease terms, and projected ROI, not just price.
Lean on a Local Expert
Our team at The Calvillo Group has deep experience in San Jose’s micro-markets. We’ll help you find off-market opportunities, vet deals, and navigate the entire 1031 process.
Let’s Talk About Your 1031 Goals
Whether you’re selling a multifamily property in East San Jose or exploring a passive NNN investment in the West Valley, we’re here to help you make your next move the right one.
