How do I prepare for a 1031 exchange?

How to do a 1031 exchange

1. Identify the property you want to sell.
2. Identify the property you want to buy.
3. Choose a qualified intermediary.
4. Step 4: Decide how much of the sale proceeds will go toward the new property.
5. Step 5: Keep an eye on the calendar.
6. Step 6: Be careful about where the money is.

What property qualifies for 1031 treatment?

As mentioned, a 1031 exchange is reserved for property held for productive use in a trade or business or for investment. This means that any real property held for investment purposes can qualify for 1031 treatment, such as an apartment building, a vacant lot, a commercial building, or even a single-family residence.

What’s the difference between real property and 1031 exchange?

If we find the asset being relinquished does qualify for a 1031 Exchange, the next question is what the replacement property will be. As discussed previously, section 1031 applies to both “real property” and “personal property.” The primary difference between a personal property exchange and a real property exchange is the definition of like-kind.

What should I know before making a 1031 exchange call?

Before making the call, it will be helpful for you to have information regarding the parties to the transaction at had (for example, names, addresses, phone numbers, file numbers, and so on). During the phone call, the exchange coordinator will ask questions about the property being relinquished and any proposed replacement property.

What should I ask a rental property owner?

You may consider creating a Frequently Asked Question section on your website or business’s marketing materials. By being upfront and clear with confident answers to important owner questions, you provide the foundation of trust necessary to start a conversation and establish a relationship with potential owners.

When do you have to identify a replacement property?

Identification requirements: The investor must identify the replacement property prior to midnight on the 45th day. The investor normally nominates three potential properties of any value, and then acquires one or more of the three within 180 days.