What are Your Options for a 1031 Property Exchange

Written by admin on May 3rd, 2011


As if there weren’t enough facts and details floating around about the 1031 property exchange, you now discover there are different types of these exchanges to choose from. Learning about your options will help you make an informed decision about the best course of action for your needs, goals, and comfort zone.


Simultaneous Exchange


In this exchange both the sale of the relinquished property and the purchase of the replacement property occur at the same time. You have at least 180 days to complete the transaction; and, many property buyers do not even have the property they will be purchasing selected until well after the initial relinquishing. However, there are some occasions when the deal flows together in rhythm and the entire transaction is completed within one day. Be warned that these transactions, while possible, are quite rare.


Delayed Exchange


These are the most common types of 1031 exchanges. In this transaction there is a delay between the relinquishing of the property and the acquiring of the subsequent property. These transactions are very strictly regulated but extremely common among those interested in tax deferred investing and commercial real estate transactions.


Reverse Exchange


In this type of transaction the replacement property is purchased before the relinquished property is sold. There are very specific and different requirements for this transaction, and you should discuss how appropriate this transaction is in your situation before you make the deal.


If this is your first time with a 1031 property exchange, it may be in your best interest to take your time and go the safer route of a delayed exchange. There is safety in the stricter regulations and you will still have the opportunity to come out on top after receiving the tax benefits and with the growth potential of your replacement property.


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