6 Phases In The 1031 Exchange Process
Tax-deferred 1031 exchanges are a tremendous opportunity for real estate investors who wish to sell their investment properties and defer any taxes. However, the Exchange can be complex, and a misstep may result in either a failed 1031 Exchange or purchasing a property that does not suit the investors' needs.
At Get 1031 Properties, we will help you select and acquire suitable replacement properties nationwide. We will guide you through the entire sale and reinvestment process and advise you on all the timing and rules for a successful 1031 Exchange. Below is our 6-step process for a successful 1031 exchange.
1. Find Out If A 1031 Exchange is Right for You.
There are clear benefits to 1031 Exchange, but make sure it is right for you. When considering a long-term investment, there are many things to consider, including the type of property ownership and potential tax liability, liquidity needs, financial and lifestyle objectives, market timing, and debt considerations.
The best way to figure out if a 1031 Exchange is right for you is to schedule a no-obligation consultation with Get 1031 Properties. You can request an appointment either by phone, Zoom, or in-person.
2. Establish A Tax-Deferred Transition Strategy With A 1031 Exchange Representative.
The timeline of a 1031 Exchange is very strict. It is crucial to have an achievable transition plan in place before you put your investment property on the market. Proper planning before purchase or sale helps eliminates many of the obstacles that can get in the way of a 1031 Exchange. As your 1031 Exchange representative, Get 1031 Properties will evaluate all potential paths that could lead to success and focus on aligning your objectives with those paths before the sale process begins.
3. Enter into a Contract to Sell Your Existing Investment Property.
Before you decide to list your property on the market, we recommend finding a qualified realtor or broker experienced in selling rental properties. We can assist with the sale, or if you have an existing relationship with a real estate agent, we would be more than happy to work with them.
4. Select a Qualified Intermediary and Open an Exchange.
Once the relinquished property is under contract, the next step is to select and open an Exchange Account with a Qualified Intermediary. The IRS requires you to use a qualified intermediary (also known as a "facilitator" or "accommodator") when exchanging your relinquished property. The proceeds are released once your Replacement Property is found and will be used to acquire the 1031 Exchange replacement property. The 3rd party intermediary is set up to prevent you from taking "constructive receipt" of the sales proceeds, which would invalidate the Exchange. Note – an Exchange Account must be opened before the sale of your relinquished property closes. Get 1031 Properties can recommend qualified intermediaries that are bonded and insured.
5. Identify Your 1031 Exchange Replacement Property (45-Day Rule).
According to the 1031 Exchange rules, investors have until the 45th calendar day from the close of escrow to identify replacement properties.
As your 1031 Exchange representative, Get 1031 Properties can help you identify and select suitable replacement properties. We have a rigorous process to vet both the replacement options we offer and the firms that sponsor them. Note – You do not need to acquire all of the properties on your identification form, but you can only close on replacement properties listed during the 45-day identification period. We will make sure you have all the necessary IRS identification information needed for your Exchange.
6. Close on Your 1031 Exchange Replacement Property (180-Day Rule).
One key milestone within the 1031 Exchange timeline is the 180-Day Rule. Within the 180 days after closing on your relinquished investment property, you must close on the purchase of your replacement property.
Get 1031 Properties will oversee the closing of your replacement property from start to finish. We will ensure the entire process is seamless. Note – should the conclusion of the Exchange take place the next calendar year, you must wait to file the previous year's taxes until the Exchange is completed as you cannot amend a tax return to include an exchange. Instead, we recommend to file an extension so that the taxes are completed following the Exchange.
Is A 1031 Exchange Right for You?
Let us help you decide. Give us a call at (408) 539 - 0809 or send an email to amit@get1031properties.com to set up your free consultation appointment. Our free consultations are informal and can be done over the phone or in person at our offices.
Get 1031 Properties: Why Choose us?
For a successful 1031 Exchange, it is critical to partner with a trustworthy professional who understands real estate, the Exchange process, and the complexity of finding potential replacement property that fulfills investment and lifestyle objectives. We have helped property owners successfully perform 1031 exchanges for over ten years by providing well-planned and tax-efficient transition strategies.
Our team of professional licensed 1031 Exchange representatives will not only help you find, select and acquire properties for your 1031 Exchanges but will also work with you to guide you through the entire process, timing, and rules.
