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The replacement property must be similar to or have greater value than the one you sold.
A 1031 exchange is an Internal Revenue Code tax that allows a taxpayer to defer the capital gains taxes associated with selling one investment property by reinvesting in another.
A 1031 exchange can be done as long as it follows two rules:
1) The proceeds from the sale must be invested into another like-kind property, and
2) The taxpayer cannot dispose of their new property for at least 180 days after purchase.
The benefits of a 1031 exchange are many, but mainly they include potential capital gains tax savings and giving you more control over your destiny in terms of what you want to invest in going forward.