1031 Exchange Strategies for Self-Storage Owners Looking to Sell in 2025
If you're thinking about selling your self-storage facility in 2025, one of the smartest financial moves you can make is understanding how a 1031 exchange can help you defer capital gains taxes and reinvest profits more strategically.
Whether you're eyeing retirement, upgrading to a larger facility, or diversifying your portfolio, a 1031 exchange is a powerful tool that savvy storage investors are using to build wealth while selling smart.
While we're not tax advisors and do not offer tax services, this article outlines the basics of 1031 exchanges so you can ask the right questions when speaking to a licensed tax professional or financial advisor.
What Is a 1031 Exchange?
A 1031 exchange, named after Section 1031 of the IRS Code, allows investors to sell a commercial or investment property and defer paying capital gains taxes if they reinvest the proceeds into a "like-kind" property.
Why this matters for self-storage sellers: Selling a facility without this strategy could trigger a significant tax bill. With a 1031, you keep more of your equity working for you.
✅ For example, a $2 million sale with $600,000 in capital gains could result in $150,000+ in taxes. A 1031 exchange allows you to roll that full amount into your next investment.
📌 Always consult a qualified tax professional for complete advice tailored to your situation.
How a 1031 Exchange Works (Step-by-Step)
Sell your current facility
Engage a Qualified Intermediary (QI) to hold the proceeds
Identify a new property within 45 days of closing your sale
Close on the new property within 180 days
Ensure both properties are held for investment/business purposes
The timelines are strict, so planning is critical.
What Types of Properties Qualify as "Like-Kind"?
The good news: most commercial properties qualify as like-kind.
This means you can exchange your self-storage facility for:
Another self-storage facility
Apartment buildings
Retail centers
Industrial warehouses
Triple-net lease (NNN) properties
This gives you flexibility to shift your portfolio while avoiding taxes now.
✅ Tip: Consider exchanging into multiple smaller properties or even a larger, stabilized facility to simplify operations.
📌 Be sure to verify your exchange options with your CPA or a 1031 exchange specialist.
Common Mistakes to Avoid
| Mistake | Why It Hurts |
|---|---|
| Waiting too long to plan | You must identify a new property within 45 days |
| Using sale proceeds directly | Funds must go through a Qualified Intermediary |
| Choosing a poor replacement asset | Low-performing assets could reduce long-term returns |
| Not aligning strategy with goals | New property should support retirement, income, or growth |
✅ Related: 5 Mistakes to Avoid When Selling Your Storage Facility
Why 2025 Might Be the Ideal Time for a 1031 Exchange
Stabilizing interest rates make financing replacement properties more predictable
High buyer demand allows you to command top dollar on your current facility
More sellers are retiring, opening up more like-kind inventory on the market
If your goal is to cash out without taking a tax hit, now could be the perfect moment to act.
📌 Note: Always seek guidance from a licensed financial or tax advisor before making exchange decisions.
Should You Sell and Exchange?
Not every situation calls for a 1031. But if you're looking to:
Retire in a tax-efficient way
Scale up into a more profitable property
Reduce hands-on management
Diversify into less active investments
a 1031 exchange is worth exploring.
✅ Not sure where to start? Request a free consultation with our team to review your goals and create a custom exit plan.
Final Takeaway: Sell Smart, Reinvest Smarter
For self-storage owners in 2025, a 1031 exchange can be the key to unlocking equity and building long-term wealth. With the right planning and guidance from licensed professionals, you can sell your facility, defer your tax burden, and reinvest on your terms.
At Sell Self Storage Now, we help owners across the U.S. maximize their exits through market pricing, buyer connections, and tailored strategy. While we don't offer tax or legal advice, we're happy to connect you with professionals who can.
✨ Ready to explore how a 1031 exchange could work for you? Contact us today and take the next step toward a smarter sale.