1031 Exchanges Explained

What Is A 1031 Exchange?

The 1031 Exchange allows you to defer taxes on the sale of real estate held for investment or business purposes, if you reinvest in a like-kind property within certain time frames and guidelines. Instead of paying the taxes due on the sale of the property, you can utilize the funds to generate cash flow and build more wealth.

SBRE will help you make the most of your exchange whether your property is office, retail, industrial, multifamily, land, or a single tenant asset. We will also review your goals to help you determine strategies to add value to your endeavors. Depending on your mission, there are many instances where we might utilize 1031 Exchanges.

How Does SBRE Assist You With A 1031 Exchange?

SBRE has consistently learned valuable best practices from advising investors through the 1031 exchange process, and here are our top ten:

1. Engage an attorney and a 1031 intermediary to assure 1031 compliance.

2. Begin looking for replacement property early. Start at the latest, the first day your relinquished property goes under contract. Do not wait until the closing.

3. Engage a knowledgeable broker as early as possible, preferably before you start marketing your relinquished property.

4. Make sure your broker has proper property search systems, research, and property owner databases needed to effectively identify as many replacement properties as possible and provide advice on the property type and market area.

5. Do not use the 45-day identification period as your deadline to have replacement property under contract. You should complete all or as much due diligence as possible on any potential replacement property prior to the identification deadline.

6. Understand the purchase agreement you will most likely use when making offers up front. Do not wait until you find a suitable property to consider the format.

7. When possible make offers in a purchase agreement format rather than a letter of intent. This may save time and keep your offer from being shopped.

8. Proactively make offers on appropriate properties, even if they are overpriced. If the property works, don't be shy about making an offer that makes sense. You never know, they may negotiate a reasonable deal. If they don't, move on.

We answer all your questions with a free consultation, so contact us today to schedule an appointment.