Tag: 1031 exchange rules

In a hot market or market’s with limited inventory, the 45-day identification rules under a 1031 tax deferred exchange can feel like too small a window. (To read more about 1031 exchange process and rules, visit our https://www.accruit.com/property-owners/1031-exchange-explained”>https://www.accruit.com/blog/1031-like-kind-exchanges-myths-vs-realitie… exchange rules provide for the ‘Reverse 1031 Exchange’ to exist. Under the Treasury Regulations, exchanges must be completed in the proper sequence. This means the sale of the relinquished property must take place before the acquisition of the new or replacement property. However, on occasion, the facts are such that a taxpayer wishes to acquire the new property before the sale or risk losing the desired new property. This reverse sequence, also approved by the IRS, is often referred to as a “https://www.accruit.com/blog/primer-1031-exchanges-and-related-types-ex… 1031 exchange.” The reverse exchange technique essentially consists of an exchange accommodator holding or “parking” title to the new property on behalf of the taxpayer to avoid the taxpayer having simultaneous ownership of two properties. Immediately after the sale of the old property (but no later than 180 days) the exchange accommodator transfers the new property to the taxpayer. This ‘technically’ creates the proper sequence. Financing the Purchase of the Replacement Property
The concept of a Reverse 1031 exchange can sound attractive to many investors until the reality of financing the purchase of the replacement property is considered.  For investors with the means to purchase the property outright in cash or those with strong lending relationships this can be relatively straightforward, however, for others they must ensure they take some nuances into consideration such as:

The title to the replacement property will be parked with an entity created by the Qualified Intermediary for the sole purpose of holding title to the property.  The loan cannot be in the name of the taxpayer, but instead must be in the name of the parking entity.  This requires a short-term bridge loan that can be refinanced into a longer-term loan or paid down once the old property is sold and new property is transferred into the name of the taxpayer.  Many banks will not entertain these loans as they do not fit into their traditional lending model.  It may take some time discussing with several local or regional banks to get them to understand the structure. 
Ensure you have sufficient collateral and equity.  Banks will underwrite the replacement property as well as look at the taxpayers overall financial position to ensure adequate coverage.  Traditionally, banks are willing to lend between 65-75% of the replacement property’s value to qualified buyers depending on the type of property and quality of collateral.
Think about financing well in advance of pursuing a purchase through a reverse 1031 exchange.  Banks take time to order appraisals and underwrite collateral for specialty bridge financing.  This can be several weeks.  If you are in a rush and can’t wait for a bank, there are lenders willing to provide these types of loans, but you are going to pay handsomely for it in rate and upfront fees

Financing a reverse  exchange can be more difficult than a traditional loan, but it is common place for 1031s.  Take the time and do the research by speaking with several banks and the right Qualified Intermediary –

In considering selling an investment property in a fast-moving real estate market through a 1031 exchange, owners are rightfully concerned about finding a suitable replacement property. The 45-day identification rules under a 1031 tax deferred exchange can feel like too small a window when supply is limited and there many bidders in the market. (To read more about 1031 exchange process and rules, visit our 1031 exchange rules provide alternatives to the traditional exchange that can be beneficial in a tight market. These alternatives are deemed Reverse 1031 Exchanges and Improvement 1031 Exchanges. 
Reverse 1031 Exchanges
Under the Treasury Regulations, exchanges must be completed in the proper sequence. This means the sale of the relinquished property must take place before the acquisition of the new or replacement property. However, on occasion, the facts are such that a taxpayer wishes to acquire the new property before the sale or risk losing the desired new property. This reverse sequence is often referred to as a “Improvement Exchange refers to a type of exchange done where some of the proceeds of the sale of the relinquished property will be used to complete improvements on the replacement property so that the taxpayer can finalize the exchange where both the value of the land and the enhanced improvements will count for the amount the taxpayer traded for. Investors may want to build on raw land or put in new heating, ventilating, air conditioning, roof, and windows on an existing property. All of which can qualify if executed properly.
In this type of exchange, the exchange facilitator parks the replacement property on behalf of the taxpayer while the desired improvements are made. Upon the earlier 180 days or the completion of the improvements, the entire value of the real property and improvements is conveyed directly to the taxpayer to complete their exchange.
As an example, an investor owns an office building in Austin, Texas and wants to invest in multi-family units in Houston. However, the only multi-family complexes for sale need significant improvements to command a premium rental income. The investor can engage an exchange facilitator to consummate an info@accruit.com

In considering selling an investment property in a fast-moving real estate market through a 1031 exchange, owners are rightfully concerned about finding a suitable replacement property. The 45-day identification rules under a 1031 tax deferred exchange can feel like too small a window when supply is limited and there many bidders in the market. (To read more about 1031 exchange process and rules, visit our 1031 exchange rules provide alternatives to the traditional exchange that can be beneficial in a tight market. These alternatives are deemed Reverse 1031 Exchanges and Improvement 1031 Exchanges. 
Reverse 1031 Exchanges
Under the Treasury Regulations, exchanges must be completed in the proper sequence. This means the sale of the relinquished property must take place before the acquisition of the new or replacement property. However, on occasion, the facts are such that a taxpayer wishes to acquire the new property before the sale or risk losing the desired new property. This reverse sequence is often referred to as a “Improvement Exchange refers to a type of exchange done where some of the proceeds of the sale of the relinquished property will be used to complete improvements on the replacement property so that the taxpayer can finalize the exchange where both the value of the land and the enhanced improvements will count for the amount the taxpayer traded for. Investors may want to build on raw land or put in new heating, ventilating, air conditioning, roof, and windows on an existing property. All of which can qualify if executed properly.
In this type of exchange, the exchange facilitator parks the replacement property on behalf of the taxpayer while the desired improvements are made. Upon the earlier 180 days or the completion of the improvements, the entire value of the real property and improvements is conveyed directly to the taxpayer to complete their exchange.
As an example, an investor owns an office building in Austin, Texas and wants to invest in multi-family units in Houston. However, the only multi-family complexes for sale need significant improvements to command a premium rental income. The investor can engage an exchange facilitator to consummate an info@accruit.com

In considering selling an investment property in a fast-moving real estate market through a 1031 exchange, owners are rightfully concerned about finding a suitable replacement property. The 45-day identification rules under a 1031 tax deferred exchange can feel like too small a window when supply is limited and there many bidders in the market. (To read more about 1031 exchange process and rules, visit our 1031 exchange rules provide alternatives to the traditional exchange that can be beneficial in a tight market. These alternatives are deemed Reverse 1031 Exchanges and Improvement 1031 Exchanges. 
Reverse 1031 Exchanges
Under the Treasury Regulations, exchanges must be completed in the proper sequence. This means the sale of the relinquished property must take place before the acquisition of the new or replacement property. However, on occasion, the facts are such that a taxpayer wishes to acquire the new property before the sale or risk losing the desired new property. This reverse sequence is often referred to as a “Improvement Exchange refers to a type of exchange done where some of the proceeds of the sale of the relinquished property will be used to complete improvements on the replacement property so that the taxpayer can finalize the exchange where both the value of the land and the enhanced improvements will count for the amount the taxpayer traded for. Investors may want to build on raw land or put in new heating, ventilating, air conditioning, roof, and windows on an existing property. All of which can qualify if executed properly.
In this type of exchange, the exchange facilitator parks the replacement property on behalf of the taxpayer while the desired improvements are made. Upon the earlier 180 days or the completion of the improvements, the entire value of the real property and improvements is conveyed directly to the taxpayer to complete their exchange.
As an example, an investor owns an office building in Austin, Texas and wants to invest in multi-family units in Houston. However, the only multi-family complexes for sale need significant improvements to command a premium rental income. The investor can engage an exchange facilitator to consummate an info@accruit.com

In considering selling an investment property in a red-hot real estate market through a 1031 exchange, owners are rightfully concerned about finding a suitable replacement property. The 45-day identification rules under a 1031 tax deferred exchange can feel like too small a window when supply is limited and there many bidders in the market. (To read more about 1031 exchange process and rules, visit our 1031 exchange rules provide alternatives to the traditional exchange that can be beneficial in a tight market. These alternatives are deemed Reverse 1031 Exchanges and Improvement 1031 Exchanges.
Reverse 1031 Exchanges
Under the Treasury Regulations, exchanges must be completed in the proper sequence. This means the sale of the relinquished property must take place before the acquisition of the new or replacement property. However, on occasion, the facts are such that a taxpayer wishes to acquire the new property before the sale or risk losing the desired new property. This reverse sequence is often referred to as a “Improvement Exchange refers to a type of exchange done where some of the proceeds of the sale of the relinquished property will be used to complete improvements on the replacement property so that the taxpayer can finalize the exchange where both the value of the land and the enhanced improvements will count for the amount the taxpayer traded for. Investors may want to build on raw land or put in new heating, ventilating, air conditioning, roof, and windows on an existing property. All of which can qualify if executed properly.
In this type of exchange, the exchange facilitator parks there placement property on behalf of the taxpayer while the desired improvements are made. Upon the earlier 180 days or the completion of the improvements, the entire value of the real property and improvements is conveyed directly to the taxpayer to complete their exchange.
For example, an investor owns an apartment rental in San Diego, California and wants to invest in single-family rentals. However, the only single-family rentals for sale need significant improvements to command a premium rental income. The investor can engage an exchange facilitator to consummate an

In considering selling an investment property in a red-hot real estate market through a 1031 exchange, owners are rightfully concerned about finding a suitable replacement property. The 45-day identification rules under a 1031 tax deferred exchange can feel like too small a window when supply is limited and there many bidders in the market. (To read more about 1031 exchange process and rules, visit our 1031 exchange rules provide alternatives to the traditional exchange that can be beneficial in a tight market. These alternatives are deemed Reverse 1031 Exchanges and Improvement 1031 Exchanges.
Reverse 1031 Exchanges
Under the Treasury Regulations, exchanges must be completed in the proper sequence. This means the sale of the relinquished property must take place before the acquisition of the new or replacement property. However, on occasion, the facts are such that a taxpayer wishes to acquire the new property before the sale or risk losing the desired new property. This reverse sequence is often referred to as a “Improvement Exchange refers to a type of exchange done where some of the proceeds of the sale of the relinquished property will be used to complete improvements on the replacement property so that the taxpayer can finalize the exchange where both the value of the land and the enhanced improvements will count for the amount the taxpayer traded for. Investors may want to build on raw land or put in new heating, ventilating, air conditioning, roof, and windows on an existing property. All of which can qualify if executed properly.
In this type of exchange, the exchange facilitator parks there placement property on behalf of the taxpayer while the desired improvements are made. Upon the earlier 180 days or the completion of the improvements, the entire value of the real property and improvements is conveyed directly to the taxpayer to complete their exchange.
For example, an investor owns an apartment rental in San Diego, California and wants to invest in single-family rentals. However, the only single-family rentals for sale need significant improvements to command a premium rental income. The investor can engage an exchange facilitator to consummate an