Meet Deferred, the new kid on the 1031 exchange block

The low mortgage rates secured by many homebuyers and those who refinanced during the height of the post-pandemic housing market has led a rising share of “accidental landlords,” those who choose to rent out their property instead of selling it when they move. 

Although there’s no definitive count on how many homeowners have earned this label in recent years, a 2024 survey from the National Association of Realtors (NAR) found that 20% of repeat buyers kept their prior residence as an investment, rental or vacation property.

Additionally, a study by real estate analytics firm Parcl found that, depending on the metro area, anywhere from 3% to 8% of people who listed their homes for sale in September 2024 had become accidental landlords by November 2024.

While not all of these people will decide to continue growing their roster of investment properties, some will, and that creates the opportunity for more 1031 exchanges. 

Under Section 1031 of the U.S. tax code, property owners can avoid paying capital gains tax on the proceeds of the sale of an investment property if they use the proceeds to purchase another non-primary residence.

In total, 1031 exchanges represent roughly $100 billion in annual transaction volume, yet less than 10% of eligible real estate deals take advantage of 1031s, according to NAR data. 

“The process is so outdated and document intensive, so people don’t take advantage of it,” Judd Schoenholtz, the co-founder and CEO of 1031 exchange firm Deferred, wrote in an email.

These difficulties were in mind when Schoenholtz — along with co-founders Alex Farrill and Aaron LaRue — created Deferred, a qualified intermediary platform that handles 1031 exchanges. 

Like other qualified intermediaries, Deferred holds the proceeds from the sale of the original property before a buyer closes on their new property. But unlike other platforms, Deferred has utilized artificial intelligence to automate the documentation process and it does not charge customers for the service.

Instead, the company generates revenue by collecting interest on the funds it holds. Depending on the sum of money being held, it will share a portion of the interest generated with the client. 

“By making 1031s more accessible, Deferred will enable every investor to exchange into new properties — revitalizing neighborhoods and fueling economic growth,” a company blog post states. 

The firm recently announced that it secured $3.6 million in seed funding, including funds from venture capital firms B Capital and Fika Ventures. Additional support came from strategic investors including executives at Ramp, Zillow, SoFi, Compass, Opendoor, Plaid and Newfront.

“At Deferred, we’re redefining what it means to be a Qualified Intermediary by combining cutting-edge fintech infrastructure with deep real estate industry expertise,” Schoenholtz said in a statement. “This funding enables us to expand access to 1031 exchanges, ensuring that every investor — not just institutional players — can leverage this powerful wealth-building tool.”

Deferred’s funding round comes just months after the company closed its acquisition of Plenti Financial, formerly known as 1031 Exchange Advantage.

Through this acquisition, Deferred gained access to an experienced qualified intermediary that has facilitated nearly 7,000 exchanges. Plenti Financial’s former leader, real estate attorney David Greenberger, now serves as the head of exchanges at Deferred.

Looking ahead, Schoenholtz said he is looking forward to working with both residential and commercial real estate agents and brokerages to help them better serve their clients’ 1031 exchange needs. 

Schoenholtz and his co-founders have previously built Open Listings, which was acquired by Opendoor in 2018, and Balance Homes, which was acquired by EasyKnock in 2023.