What is a 1031 Exchange?
There are some very specific rules you need to be aware of if you would like to do use a 1031 Exchange to move your money from one property to another. A little further down this page, I will provide some audio from a recent interview I did with a local provider who does 1031 Exchanges in Auburn. The official term for that role is called a "Qualified Intermediary", or QI for short.
In the simplest terms, here's how the process goes from start to finish on the easiest and most common type of 1031 transactions:
Step 1: You decide to sell, but haven't sold yet.
Step 2: You engage a 1031 provider (Qualified Intermediary) to help with your exchange
Step 3: You list your property by yourself or with the help of a licensed Real Estate Broker (like Auburn Investment Props, for example)
Step 4: You close on the sale of your property.
Step 5: The Intermediary receives the proceeds from your first closing, and the holds them until your next closing.
Step 6: You have 45 days from the sale of your property to identify potential replacement properties, and submit a list to your Intermediary (QI). I would strongly suggest you work with Broker/agent that understands the process, the severity of the deadlines, and the urgency of meeting them.
Step 7: You have 180 days from the sale of your property to close on your replacement property.
Step 8: The Intermediary wires the money they are holding to the closing attorney on your behalf, and you add in the remainder needed by bringing your own cash or getting a bank loan.
Important Points:
- The 45 & 180 day deadlines will pass quicker than expect, and the penalty for missing them are severe.
- If you don't have an Intermediary lined up BEFORE close on your sale, it is too late.
- The 45 & 180 day time limits to not extend over the last weekend of the period. 181 is not fast enough
- If you don't spend it all, you will just own cash on what is left over. It isn't "all or nothing".
- The entity (person, LLC, etc) on both halves of the exchange must be the same.
- 1031 Exchanges can be one property for one property, one for multiple, multiple for one, or multiple for multiple
There are too many details for me to list them all, so I suggest you listen to these audio clips and then call me to help you sell your first property and/or buy your replacement properties.
Chris Kearns
Auburn Investment Properties, LLC
In the simplest terms, here's how the process goes from start to finish on the easiest and most common type of 1031 transactions:
Step 1: You decide to sell, but haven't sold yet.
Step 2: You engage a 1031 provider (Qualified Intermediary) to help with your exchange
Step 3: You list your property by yourself or with the help of a licensed Real Estate Broker (like Auburn Investment Props, for example)
Step 4: You close on the sale of your property.
Step 5: The Intermediary receives the proceeds from your first closing, and the holds them until your next closing.
Step 6: You have 45 days from the sale of your property to identify potential replacement properties, and submit a list to your Intermediary (QI). I would strongly suggest you work with Broker/agent that understands the process, the severity of the deadlines, and the urgency of meeting them.
Step 7: You have 180 days from the sale of your property to close on your replacement property.
Step 8: The Intermediary wires the money they are holding to the closing attorney on your behalf, and you add in the remainder needed by bringing your own cash or getting a bank loan.
Important Points:
- The 45 & 180 day deadlines will pass quicker than expect, and the penalty for missing them are severe.
- If you don't have an Intermediary lined up BEFORE close on your sale, it is too late.
- The 45 & 180 day time limits to not extend over the last weekend of the period. 181 is not fast enough
- If you don't spend it all, you will just own cash on what is left over. It isn't "all or nothing".
- The entity (person, LLC, etc) on both halves of the exchange must be the same.
- 1031 Exchanges can be one property for one property, one for multiple, multiple for one, or multiple for multiple
There are too many details for me to list them all, so I suggest you listen to these audio clips and then call me to help you sell your first property and/or buy your replacement properties.
Chris Kearns
Auburn Investment Properties, LLC