What is a 1031 Exchange?
Defer capital gains taxes and maximize your real estate investment potential.
What is a 1031 Exchange?
A 1031 exchange is a way to defer paying capital gains tax on the sale of a business or investment property by using the proceeds to buy a similar investment property of equal or greater value.
Equity 1031 Exchange is a qualified intermediary (QI), the independent third party required by the IRS in both the sale and purchase transactions. Our experience and service will ensure a smooth and successful exchange.
LEARN MORE
Download our comprehensive 1031 Exchange Guide today.
Everything you need to know about 1031 exchanges including key terms, tax benefits, important rules, and much more!
5 Important Rules of a 1031 Exchange
Net Selling Price (NSP): To avoid capital gains tax on the sale of your relinquished property, you must spend an amount equal to or greater than your net selling price. (NSP equals selling price minus title fees and realtor commissions)
Property Usage: The property must be held for business/investment use.
Qualified Intermediary (QI): Investors must use a QI to facilitate the exchange. They must engage a QI before closing on their sale.
45-Day Rule: Within 45 days of closing on the sale, the exchanger must formally identify their target replacement properties. They can identify up to three properties. If they wish to identify more than three properties, restrictions will apply.
180-Day Rule: You must close on one or more of your identified replacement properties within 180 calendar days of closing on your relinquished property.
Types of Exchanges
STANDARD EXCHANGE
Sell First then Buy: The most common type of 1031 exchange occurs when you want to sell your current property and then buy a replacement property.
REVERSE EXCHANGE
Buy First then Sell: A Reverse 1031 Exchange allows you to buy a replacement property first and then sell your current property. Reverse exchanges allow you to take advantage of buying the right property when it becomes available OR when you want to avoid the restriction of identifying a replacement property within the 45-day window required in a standard exchange.
IMPROVEMENT CONSTRUCTION EXCHANGE
Wrap Improvements into Your Exchange: If your replacement property is priced significantly lower than your relinquished property, you may be able to wrap the cost of necessary improvements to the replacement (new) property into the value. This can be done as either an Improvement Exchange or a Reverse Improvement Exchange.
Learn more about 1031 exchange types.
What is a Qualified Intermediary (QI)?
A Qualified Intermediary is an independent third party required by the IRS that acts as the middleman in both the sale and purchase of the properties in the exchange. The Qualified Intermediary, or QI, is required for the exchange and cannot be any agent or fiduciary of the investor. The QI prepares the exchange agreement, escrows the proceeds, and coordinates the exchange with closing agents.
Is a QI necessary for a 1031 exchange?
Yes, according to section 1031 of the Internal Revenue Code, a QI is necessary for the exchange to be valid. Not using a QI or using one who does not comply with key requirements can invalidate the transaction, negate tax benefits, and result in unnecessary penalties. The QI must be contacted to initiate the exchange before closing
Why Equity 1031 Exchange?
EXPERIENCE
Formerly Midland 1031, our team has been facilitating exchanges nationwide for over 25 years, handling all exchange types, no matter how simple or complex. We’ve facilitated exchanges ranging from under $100,000 to over $10 million. We have a Certified Exchange Specialist® on staff and are a proud member of the Federation of Exchange Accommodators (FEA).
PERSONALIZED SERVICE
We value our clients and the relationships that we establish with them. All our clients have a dedicated member of the 1031 team who will work with them on their exchange from beginning to end. We understand every exchange is unique, so each one is handled with the utmost attention to detail.
SECURITY
We maintain a fidelity bond and a professional insurance policy from a leading, independent insurance underwriter to protect our clients and the funds they entrust to us.
Are you a Broker, Realtor, or Title Agent?
Equity 1031 Exchange is dedicated to educating real estate professionals and their clients on the rules and processes of 1031 exchanges, assisting you along the way with personalized service. Learning the basics of 1031 exchanges can give you and your team a professional edge over others in your industry.
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Frequently Asked Questions
Have questions related to 1031 exchanges? Check out our FAQs
SCHEDULE A MEETING
Learn more about 1031 exchanges or get started today: Schedule a virtual meeting with an exchange specialist or call (239) 333-1031.
Getting Started with a 1031 Exchange
READY TO GET STARTED?
If you’re interested in doing a 1031 exchange with Equity 1031, please complete this form. A member of our team will then contact you within one business day to start your 1031 exchange.
Please note: you must set up your exchange before closing on your property. We request three to five business days to set up a Standard Exchange. Contact Equity 1031 Exchange for timelines on setting up a Reverse or Improvement Exchange.