The Profile
A tax loophole, turned into a product
There is a section of the U.S. tax code, number 1031, that lets you sell an investment property and roll the proceeds into another one without paying capital gains tax. It has existed, in some form, since 1921. For a century it was the quiet engine of real estate fortunes - and, for most ordinary investors, effectively invisible.
The reason it was invisible is worth dwelling on, because it explains the entire business. A 1031 exchange has a rule: you cannot touch the money in between. The instant the proceeds hit your bank account, the tax is due. So the code requires a middleman - a Qualified Intermediary, or QI - to hold the cash, sign the documents, and hand it to the seller of your next property. The QI is unavoidable. It is also, historically, a business that runs on paper packets, flat fees, and the quiet fact that it gets to keep the interest earned on hundreds of thousands of your dollars for up to six months.
Deferred, founded in 2024 and based in Pasadena, California, looked at that arrangement and noticed something that is obvious in hindsight and apparently was not obvious to anyone for a hundred years: the interest on the float can be worth more than the fee. So Deferred stopped charging the fee. It runs the exchange for nothing, earns money on the interest of the funds it holds in FDIC-insured, segregated accounts, and then - the part competitors find annoying - shares a portion of that interest back with the client.
This is the kind of business model that sounds like a trick and is actually just arithmetic. If you are holding a large sum in an interest-bearing account for months, the yield can comfortably exceed the few hundred to few thousand dollars a traditional QI would invoice. Deferred keeps some, returns some, and the customer experience becomes: the intermediary paid me. It reframes a fee as a friction, and friction, unlike revenue, is something a startup is happy to delete.
Your exchange funds earn interest - and unlike other Qualified Intermediaries who keep it, we share it with you.
— Deferred
The people building this are not first-timers. CEO and co-founder Judd Schoenholtz, along with Alex Farrill and Aaron LaRue, previously built Open Listings, a home-buying startup acquired by Opendoor in 2018, and Balance Homes, acquired by EasyKnock in 2023. Having sold two real estate companies, they could have chosen any glamorous corner of the industry. They chose the Qualified Intermediary - the plumbing. That is a tell. The most durable value in real estate tends to hide in the parts nobody wants to look at, and a QI is about as unglamorous as it gets: a regulated custodian of other people's money, bound by IRS deadlines, trusted or nothing.
