1031 Exchange Timing & Options 

Please consult with your accountant first before participating in a 1031 exchange.

Most sellers are concerned that there is not enough time to find a replacement property in the event they sell their apartment buildings.

 

Here are some timelines to use to find a replacement property.

  1. Timing

    • Sellers have approximately 145 days to locate an exchange property, the search will start the day the property is listed with us. See below the approximate breakdown.

    • There are approximately 60 days for marketing and review of offer process.

    • There are approximately 60 days for escrow closing period.

    • Seller has a 45 day identification period from close of escrow date of relinquished property per IRS rules.

    • Based upon the above scenario seller has approximately 180 days to find replacement property.

    • Seller has 180 days to close escrow from close of escrow of relinquishment property.

  2. Inventory & Sources

    • We have off market listings

    • On market listings

    • Expired and withdrawn listings

    • Direct calls made to apartment building owners in a specific city and zip code

    • Email to owners of buildings in specific city and zip code

  3. Defer the tax gain through any of the following methods:  (Note there are more exchange methods-please see types of exchanges on any qualified intermediary exchange website)

    • 1031 Delayed Exchange (mentioned above) – defer taxes to any type of property held for investment (multifamily, single family homes, retail center, office, industrial, warehouse, net leases, etc.)

    • Reverse Exchange-Buy the desired asset first then sell.

    • Installment Sale – owners decides to carry financing to defer the tax gain for a specified number of years.

    • Deferred Sales Trust –Your asset is transferred into a trust overseen by a third-party trust account manager with you as the designated beneficiary. The trust will sell the asset and then distribute the proceeds of that sale to you over time according to a prearranged installment contract. The sales proceeds can be held as cash or reinvested to build additional value. No capital gains taxes are realized until the installment payments touch the principal. The installment agreement remains flexible in order to allow the beneficiary to control the capital gains tax exposure.