What is the 1031 Exchange Process?
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For Sale Property listing
When you sell a business or investment property, this process begins. Listing your property for sale is an excellent time to consider an exchange. How do you intend to accomplish your goals? How will the proceeds be used?
Analyze Whether An Exchange Is A Good Option For You
Consider whether the property is your primary residence or a second/vacation home when considering an exchange. Are you sure? Go ahead. Has my sale price increased since I purchased it? Do you agree? Let’s move forward. Has the property been depreciated? Do you agree? You may proceed. You will most likely want to do a 1031 exchange if you have a taxable gain on your property.
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Find Replacement Properties And Begin Searching
Have you already? Getting started on this process should be done as soon as possible. When you sell your relinquished property, you have 45 days to identify replacement property, and you cannot conduct due diligence and search in that time frame. If you’re looking for passive income properties, our team has over 20 years of experience.
Get In Touch With A QI
You’ve already found a great QI if you’re reading this. Make sure you contact a QI before closing, no matter what type of exchange you choose. Throughout the process, you will receive guidance from our team, and we will provide the documents you need for closing. We can assist you if you need a last-minute exchange because you didn’t plan. Same-day exchanges are also possible!
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Finalize The Sale
Upon reaching an agreement with your buyer, you will inform them, your agent, and the title company that the closing will be a 1031 exchange. You will be required to include a ‘cooperation clause’ in your sales contract if you plan to exchange the property.
Eliminate All Landlord Hassles & Diversify Your Investment Today
Sale Closes
We’ll align with your title company so that all necessary documents are ready for you to sign at closing if you’ve coordinated with us ahead of time. After closing on your relinquished property, your QI will hold the funds, and the clock begins – you have 45 days to find a replacement property and 180 days to complete the transaction.
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45 Days
Exchangers often begin looking for replacement property during their 45-day period. Our suggestion to clients is not only to identify suitable replacement property within 45 days but also to get it under contract and close within this timeframe. Your QI makes IDs in writing. A limit applies to the number of exchangeable properties, so risking a failed or incomplete exchange is worth the effort when large sums of money are at stake.
Get Replacement Property Under Contract.
As soon as you receive your replacement property under contract, it would be best if you informed the seller of your intent to exchange. Similar to a regular real estate closing, the closing process is straightforward.
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Replace Your Property And Close On It
Because you have now completed your exchange, you have deferred paying capital gains taxes until after closing. You can defer taxes indefinitely by doing exchanges every time you sell a property.
In The Aftermath Of The Exchange
After completing your exchange, you will receive all relevant documentation for your records and taxes.
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1
For sale property listing
When you sell a business or investment property, this process begins. Listing your property for sale is an excellent time to consider an exchange. How do you intend to accomplish your goals? How will the proceeds be used?
2
Analyze whether an exchange is a good option for you
Consider whether the property is your primary residence or a second/vacation home when considering an exchange. Are you sure? Go ahead. Has my sale price increased since I purchased it? Do you agree? Let’s move forward. Has the property been depreciated? Do you agree? You may proceed. You will most likely want to do a 1031 exchange if you have a taxable gain on your property.
3
Find replacement properties and begin searching.
Have you already? Getting started on this process should be done as soon as possible. When you sell your relinquished property, you have 45 days to identify replacement property, and you cannot conduct due diligence and search in that time frame. If you’re looking for passive income properties, our team has over 20 years of experience.
4
Get in touch with a QI.
You’ve already found a great QI if you’re reading this. Make sure you contact a QI before closing, no matter what type of exchange you choose. Throughout the process, you will receive guidance from our team, and we will provide the documents you need for closing. We can assist you if you need a last-minute exchange because you didn’t plan. Same-day exchanges are also possible!
5
Finalize the sale
Upon reaching an agreement with your buyer, you will inform them, your agent, and the title company that the closing will be a 1031 exchange. You will be required to include a ‘cooperation clause’ in your sales contract if you plan to exchange the property.
Eliminate All Landlord Hassles & Diversify Your Investment Today
6
Sale closes
We’ll align with your title company so that all necessary documents are ready for you to sign at closing if you’ve coordinated with us ahead of time. After closing on your relinquished property, your QI will hold the funds, and the clock begins – you have 45 days to find a replacement property and 180 days to complete the transaction.
7
45 days
Exchangers often begin looking for replacement property during their 45-day period. Our suggestion to clients is not only to identify suitable replacement property within 45 days but also to get it under contract and close within this timeframe. Your QI makes IDs in writing. A limit applies to the number of exchangeable properties, so risking a failed or incomplete exchange is worth the effort when large sums of money are at stake.
8
Get replacement property under contract.
As soon as you receive your replacement property under contract, it would be best if you informed the seller of your intent to exchange. Similar to a regular real estate closing, the closing process is straightforward.
9
Replace your property and close on it
Because you have now completed your exchange, you have deferred paying capital gains taxes until after closing. You can defer taxes indefinitely by doing exchanges every time you sell a property.
10
In the aftermath of the exchange
After completing your exchange, you will receive all relevant documentation for your records and taxes.
Explore 1031 Exchange Opportunities
Connect with our 1031 exchange experts and find the right property to complete your exchange process.