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Types of 1031 Exchanges

real estate taxes

Different types of 1031 exchanges work for different situations. A basic deferred exchange works for many real estate investors that are simply selling one property and buying another of greater value. If you need to buy a new property before selling the old property, a reverse exchange will still allow you to defer the capital gains taxes. Or, if you'd like to buy a piece of property with no structures on it so you can build to suit, a construction exchange might be right for you.

To find out what type of exchange fits your situation best, call us now at 239-659-1031 now or request your free consultation to learn more. Or, if you're ready you can start an exchange online now.

Deferred Exchange

The most common type of 1031 exchange, a deferred exchange is pretty straightforward. The sale of a relinquished property by the exchanger is followed by the acquisition of replacement property. These transactions must be completed within the 180 time frame as laid out in the IRS guidelines.

Reverse Exchange

Can you buy the new property before the sale of the old property and still qualify for a 1031 exchange? Yes! A reverse exchange allows you to acquire your like-kind replacement property first and then sell your currently-held property. As with other types of exchanges, you cannot hold the title to both properties at the same time during the process since this would disqualify the exchange. Instead, your Qualified Intermediary must take the title to your new property first and hold it until the old one sells. You then have 45 days to identify the property you want to sell and 180 days to sell it and get in title to the new property the QI is holding for you.

Construction Exchange

What if you'd like to construct your own building on your replacement property? No problem! When the developer requires you to buy your land before construction begins, you can do a construction exchange. A construction exchange allows you to sell your old property and use that money to buy a piece of bare land and build on it. Then you have 180 days from the date you sold your old property to get in title to the new one.