1031 Exchange is an Internal Revenue Code (IRC) provision that defers tax on qualifying exchanges on like-kind of real estate. The 1031 exchange defers that taxpayer from paying capital gains on the sale of the property if the funds are reinvested and exchanged for a like-kind of real estate. 1031 exchanges are only designated for real estate held for investment or for a productive use and located in the United States. Properties in which the funds are being exchanged must also be located in the United States.

1. Step 1: Selling Current Property:
   A 1031 exchange cannot occur until a property is sold. The purpose of a 1031 exchange is to sell a property and exchange the fund for a like property. So, the first step to a 1031 exchange is to decide to sell your current property. There are many factors to consider when deciding to sell current property. These factors include debt owed on the property, basis in the property, the properties income, and the properties current value.
2. Step 2: Find a Qualified Intermediary:
   This step should go simultaneously with Step 1. A qualified intermediary is a third party institution or company established to administer and facilitate a 1031 exchange. The roles of a qualified intermediary include holding the exchange funds, filing identification for the three chosen properties, preparing exchange closing documents and completing the exchange. Locating a qualified intermediary is important because once the original property is closed, the funds will go directly to the qualified intermediary until the closing of the exchange property.
3. Step 3: 45 Days to Identify:
   After the original property has closed, the seller now has 45 days to identify up to three like-properties. The buyer can identify more than three properties if they close on 95% of the combined values of the properties, or the total value of identified properties is less than 200% of the sales price of the original property. If the seller is selling one property, the funds from the property can be utilized to buy multiple lower-valued properties that amount to the sales price of the original property. It is recommended that the buyer begin searching and offering on like-properties as soon as the original property is under contract and before closing.
4. Step 4: Closing the Exchanged Property:
   The last step in a 1031 exchange is closing the newly located property with the funds from the original property. The closing must occur within 180 days from the closing date of the original property. Once a new property is located and the buyer has properly completed their due diligence on the property, they proceed to the closing of the property. The qualified intermediary will work with the title company to prepare the relevant closing documents as well as wiring the funds from the original property to close on the exchanged property.

You must talk to an experienced and professional 1031 exchange coordinator. The information about your possible exchange helps identify which strategy is ideal for you. We also provide a free consultation at (424) 348-0300 or by email: 1031propertyfind@gmail.com.

You must talk to an experienced and professional 1031 exchange coordinator. The information about your possible exchange helps identify which strategy is ideal for you. We also provide a free consultation at (424) 348-0300 or by email: 1031propertyfind@gmail.com.

You can do this by following these rules:

1. Ensure your replacement property has a higher or equal net sales price.
2. Move your net equity into the new property as a down payment.

You likely qualify if you’re considering selling an investment property and would like to reinvest your benefits as opposed to paying taxes. You can email or call one of our 1031 experts for a free consultation. We can help you better understand your exchange options.