How One Investor Turned a Single Property Into Two—Without Paying Taxes

Real estate investing isn’t just about buying and selling houses—it’s about strategic moves that maximize wealth over time. In this post, we’re pulling back the curtain on a real transaction we’re working on right now, where an investor client of ours leveraged smart financial planning to turn one rental property into two—without paying a dime in capital gains taxes.

This is a perfect example of how real estate can build wealth, and it’s something that’s possible for many investors—if they know how to do it right.

From Bonney Lake to Star, Idaho: A Smart Investment Move

We’re currently in Star, Idaho, a fast-growing town just north of Boise, helping our client finalize two property purchases. Star has become a hot spot for investors, thanks to:

✅ Lower home prices compared to major metro areas
✅ High rental demand with a growing population
✅ Landlord-friendly laws
✅ Strong appreciation potential in emerging markets

Our client, a Washington-based investor, recently sold a rental property in Bonney Lake that they had owned for 24 years. They originally purchased it for $191,000, and we just closed the sale for $520,000.

Normally, a gain that large would come with a big tax bill—about $78,000 in capital gains taxes. But instead of handing that money over to the IRS, our client used a powerful tool in the tax code to keep all of it working for them.

The Power of the 1031 Exchange

Enter Section 1031 of the tax code—an investor’s best friend.

A 1031 exchange allows an investor to defer capital gains taxes if they reinvest their sale proceeds into new investment properties. That means instead of losing nearly $80K to taxes, our client gets to leverage all of their profits into new properties—growing their portfolio without losing momentum.

Now, they had two options:

Option 1: Buy One House in Idaho With Cash

• Purchase one house for $480,000
• No mortgage, no financing costs
• Cash flow from rental income begins immediately

Option 2: Buy Two Houses With Large Down Payments

• Purchase two new homes for $960,000 total
• Use 50% of the Bonney Lake sale proceeds as down payments
• Finance the rest with two mortgages
• Double their asset base and rental income potential

They went with Option 2—choosing to buy two homes instead of one.

Why New Construction Over Resale?

You might wonder: Why buy brand-new homes when older resale properties are cheaper?

The answer comes down to efficiency and return on investment:

🏡 Immediate rental income – No delays for renovations, meaning cash flow starts right away.
🔨 No major repairs – Everything is brand new, reducing maintenance costs.
👷 Builder warranties – If something goes wrong, the builder is responsible for fixing it.
💰 Top-of-the-market rent – Tenants are willing to pay more to be the first to live in a brand-new home.

On top of that, Idaho’s builder and lender incentives sweetened the deal even more. We negotiated:

✔ $32,000 in builder credits (usable for upgrades or closing costs)
✔ $9,400 lender credit to buy down their mortgage rate from 7.5% to 6.8%
✔ $274 per month in mortgage savings per property

These advantages made new construction the smarter play over an older resale home.

The Long-Term Wealth Building Strategy

At first glance, buying one house with no mortgage seems like the safer move. But in the long run, leveraging two properties creates more wealth.

Here’s how the math plays out:

💰 One house → Worth $480,000 today
📈 5% annual appreciation → Worth $612,615 in 5 years

🏡 Two houses → Worth $960,000 today
📈 5% annual appreciation → Worth $1,225,230 in 5 years

By choosing two homes instead of one, our client is controlling twice the assets and gaining twice the appreciation potential—all while using the same initial sale proceeds from Bonney Lake.

This is how wealth compounds in real estate.

The Takeaway: Leverage Knowledge for Smart Investing

Real estate is one of the most powerful wealth-building tools available, but only if you know how to strategically position your investments.

This deal isn’t just theory—it’s a real-world example of how investors use tax strategies, financing, and market knowledge to multiply their returns.

And here’s the thing: We do this all the time.

At Rethinking Real Estate, we don’t just talk about investing—we’re actively involved in transactions like this every day. Whether you're looking to sell, buy, invest, or just learn how to make real estate work for you, we’re happy to share our knowledge and help you strategize.

📩 Thinking about building wealth through real estate? Reach out to us—we’d love to help.