How Does a 1031 Exchange work?
- Fast and easy process
- Trade into passive income
- Strong Credit
What is a 1031 Exchange and How Does It Work?
A 1031 Exchange, or like-kind exchange, allows real estate investors to defer capital gains taxes by reinvesting proceeds from a sold property into a qualifying new property. This promotes wealth growth and portfolio diversification. Here’s a breakdown of the process and why our brokerage is your ideal 1031 Exchange partner.
What do NNN properties look like?
Trade into passive income
Zero-Minimal Management.
Strong Credit
Build generational wealth
1031 timeline
Buyers must be aware of the strict timeline of the 1031 exchange
Day 1
The 1031 exchange officially begins when the relinquished property is sold. A Qualified Intermediary (QI) is engaged to hold the sale proceeds in escrow to ensure compliance with IRS guidelines.
Day 45
The taxpayer has 45 calendar days from the sale date to identify potential replacement properties. Key Milestone: By Day 45, all identified properties must be submitted to the QI in writing.
Day 180
The taxpayer has 180 days from the sale of the relinquished property to close on the replacement property. Key Milestone: By Day 180, the exchange must be completed with the purchase of the replacement property.
Why work with a buy side broker?”
When buying a property in a 1031 exchange, you should always work with a designated buy side broker and avoid working directly with the listing agent. A listing agent’s primary loyalty is to the seller, creating a conflict of interest. Listing agents aim to close deals for their seller clients, often omitting critical details about a property’s drawbacks.
Our 1031 Exchange Services: How We Guide You at Every Step
We are your buy side concierge. We will help you select your next investment property and negotiate the terms of your new acquisition.
For more details, click below
Step 1: Planning the Exchange +
Before beginning your 1031 Exchange journey, it’s essential to assess your investment goals, understand IRS eligibility requirements, and plan a timeline. This planning phase includes understanding key 1031 Exchange rules, like the 45-day identification period and the 180-day closing window. Our expert brokers will assist in determining if a 1031 Exchange is suitable for you, ensuring you’re well-prepared from day one.
Step 2: Selling Your Property +
The 1031 Exchange process begins with selling your current investment property. For the transaction to qualify as a 1031 Exchange, the proceeds from the sale must be held by a Qualified Intermediary (QI), not directly by you. Our brokerage has trusted connections with experienced QIs to secure your funds, helping you adhere to IRS rules and avoid disqualification from tax deferral.
Step 3: Identifying Replacement Properties +
Within 45 days of the sale of your property, you must identify one or more potential replacement properties. This stage is crucial, as the IRS has strict guidelines on what qualifies as ‘like-kind’ and the timeline for property identification. Our team offers extensive market insights and property matching services, ensuring you have access to qualified options and can make informed choices.
Step 4: Closing on New Properties +
From the date of the sale of your relinquished property, you have 180 days to close the transaction. During this period, our team will help coordinate inspections, financial arrangements, and any necessary due diligence, ensuring compliance with IRS regulations and a seamless exchange experience. Our goal is to provide you with peace of mind, knowing each detail is handled by experienced professionals.
Step 5: Completing the Exchange +
Once the new property is closed, your 1031 Exchange is officially complete. Our brokerage continues to support you post-exchange, offering guidance on managing your new investment to maximize returns.
Why Work with a Professional 1031 Exchange Broker? +
Navigating a 1031 Exchange can be complex, from meeting tight deadlines to ensuring compliance with tax regulations. Our team specializes in 1031 Exchanges, offering full-service support in planning, property identification, and regulatory compliance. With our brokerage, you’ll have access to expert advice, a network of trusted partners, and strategic insights, making your 1031 Exchange smooth and successful.
Our 1031 Exchange Services: How We Guide You at Every Step +
- Personalized investment strategy planning
- Qualified Intermediary referrals for fund security
- Real estate lawyer referrals for a smooth transaction
- Comprehensive property matching and identification support
- Coordination of inspections, financing, and closing services
- Post-exchange guidance for property management and portfolio growth
How we compare to the rest
| Benefit | Typical 1031 Exchange Agents |
The1031Exchange.com
Best Option
|
|---|---|---|
| Conflict of Interest | Often promote their internal listings to earn higher commissions. | No Conflicts of Interest: We focus solely on finding the best property for your unique needs without pushing internal listings. |
| Search Criteria | Limit search to their own network or available listings, missing out on off-market opportunities. | Exhaustive Property Search: We evaluate all listings, off-market deals, and even scour Google Maps to find your ideal property. |
| Advice | May recommend properties that are less than ideal to quickly close deals and maximize commissions. | Independent and Objective Advice: We reject more than 99% of properties to ensure you avoid bad investments. |
Frequently Asked Questions
In a 1031 Exchange, properties must be “like-kind,” meaning they should be similar in nature or character, regardless of quality. Qualifying properties include rental homes, commercial buildings, raw land, and industrial properties. Personal-use properties like primary residences typically don’t qualify. Our specialists can help you identify eligible properties and ensure IRS compliance.
You have three main options: (1) The “Three Property Rule” lets you identify up to three properties, regardless of value. (2) The “200% Rule” allows unlimited properties, provided their total value doesn’t exceed 200% of the sold property’s value. (3) The “95% Rule” permits identifying any number of properties, as long as you acquire at least 95% of the total value. We’ll guide you in choosing the best approach for your goals.
The 45-day deadline is strict. If you fail to identify replacement properties within this timeframe, you lose the tax-deferred benefits of the exchange and must pay capital gains taxes on the sale. Our team will ensure you stay on schedule, identify suitable properties, and avoid costly mistakes.
No, there’s no limit. Many investors use a strategy called “swap ‘til you drop,” repeatedly deferring taxes through successive exchanges. Each exchange allows you to grow your portfolio and reinvest capital gains. We’ll help you navigate the rules to maximize your long-term wealth-building strategy.
A Qualified Intermediary (QI) is essential, as the IRS prohibits you from directly accessing proceeds from your property sale. The QI holds these funds to maintain tax-deferral eligibility and ensures compliance. We’ll connect you with reputable QIs for a secure and seamless transaction.
Yes, you can use a 1031 Exchange to upgrade or diversify. Whether you’re exchanging a single property for multiple ones or moving from residential to commercial properties, this tool helps you align investments with your goals. Our team specializes in strategic portfolio repositioning to maximize growth.
Key benefits include deferring capital gains taxes, reinvesting 100% of your proceeds, and significantly growing your portfolio over time. You can also upgrade assets, diversify geographically, or enhance cash flow potential. Our experts will help you make the most of these advantages for a solid long-term strategy.
Build Generational wealth
We help buyers find great real estate investments