How do I set up a 1031 exchange?

The steps involved in a 1031 exchange

1. Identify the property you want to sell.
2. Hire a qualified intermediary (QI) to facilitate the transaction.
3. Add a relinquished property addendum to any offer you get.
4. Send a copy of your sales contract to the QI as soon as possible.

Do you need a broker to do a 1031 exchange?

Although there are a few issues regarding sales and purchases between related parties, most Exchanges are structured not unlike any other typical sale and subsequent purchase. A 1031 exchange does not obviate the need for a realtor.

Can an individual do a 1031 exchange?

However, a 1031 exchange is not restricted to real estate alone. Some personal property may qualify for a 1031 exchange too. The IRS has created a list of who qualifies for this exchange: Individuals.

How long does it take to do a 1031 exchange?

It can take 5 days, 45 days, or all 180 days. First, the IRS’s rules. You must complete your 1031 exchange within 180 days of selling your old property by purchasing one or more of the properties on your list. You cannot buy property as part of the exchange that is not on the 45-day identification list.

Who can handle 1031 exchange?

A qualified intermediary (QI) must facilitate a 1031 exchange. The QI is a person who holds funds from the relinquished property and uses them to acquire the new replacement property. These funds never come into contact with the property owner, who is involved in the 1031, per the IRS 1031 rules.

What are the fees for a 1031 exchange?

The short answer. The direct cost to you in a 1031 exchange typically comes in the form of a fee paid to your QI. QI fees vary, but most reports indicate that a typical deferred 1031 exchange costs between $600 and $1,200. Certain incidental expenses may also be passed on to you.

Can an LLC do a 1031 exchange?

That said, you can do a 1031 exchange with an LLC on the “entity level.” More simply, if the entire partnership sells the existing property, stays intact as a partnership, then purchases a replacement property together, this is allowed.

Can a Realtor do a 1031 exchange?

Real estate agents play a significant role during the course of a real estate transaction. A 1031 exchange allows a seller of real estate to defer the payment of taxes which would otherwise be due upon selling property. The tax deferral occurs when the seller acquires new property to replace the property that was sold.

How long must you hold 1031 property?

If a property has been acquired through a 1031 Exchange and is later converted into a primary residence, it is necessary to hold the property for no less than five years or the sale will be fully taxable.

Is a 1031 exchange difficult?

#2 Finding “like-kind” properties can be difficult In order to do a 1031 exchange, you must first identify which property(s) you’d like to invest the money in. However, it can be very challenging to find “like-kind” replacement properties that fit the bill, especially within the time constraints of 1031 exchanges.

Can I do a like kind exchange with myself?

You can only perform a 1031 exchange between investment properties, but you can’t do this with personal property. If you exchange for a cheaper property, you’ll have to consider the taxes on the price difference.

When and why to use a 1031 exchange?

A 1031 exchange can be used by savvy real estate investors as a tax-deferred strategy to build wealth. The many, complex moving parts not only require understanding the rules, but also enlisting professional help-even for seasoned investors.

What are the steps of a 1031 exchange?

3 Easy Steps for a 1031 Exchange: At closing, all proceeds are directed to a Zions Bank ® qualified trust account. Identify your replacement property within 45 days of the relinquished property sale. Acquire your replacement property within 180 days of the relinquished property sale, or the due date of the tax return, including extensions, for the year of the sale.

Can I do a 1031 exchange as a foreign investor?

Like US residents, foreigners can participate in so-called Like-Kind Exchanges under IRC code Section 1031 (“1031-Exchange”) upon sale of US real property interest. However, the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”) can significantly complicate a 1031-Exchange process for foreign investors.

What does it cost to do a 1031 exchange?

There can be significant costs associated with a 1031 exchange. You can expect to pay a fee around $1,000 for a standard 1031 exchange, and the facilitator can earn thousands of dollars in interest income. If you had sold the property and held onto the proceeds, you could have made that money yourself.