What is a 1031 exchange?
It's a section of the federal tax code that can let an investor sell one investment property and put the proceeds into another one, and put off paying tax on the gain when they do. That's why investors use it when they move from one investment property to the next.
I'm a real estate agent, not a tax adviser, and this isn't tax advice. Whether an exchange works for you depends on your situation, and your CPA is the person who confirms it before you list.
Can I do a 1031 exchange on any property I own?
These exchanges are built for investment and business property, not for a home you live in. Whether your property qualifies is a question for your CPA, so ask before you list, not after you're in escrow.
If you're not sure how your property would be treated, tell me what you own and how it's used. I'll help you gather what your CPA needs to give you a clear answer.
What should I do before I list the property?
Two calls come first. Talk to your CPA about whether an exchange makes sense for you, and line up a qualified intermediary, the neutral company that holds the sale money during an exchange. In an exchange, the proceeds generally aren't supposed to pass through your hands, so this has to be set up before closing, not after.
Once those two are in place, we plan the sale. I'll coordinate with your CPA and your intermediary so everyone is working from the same timeline.
Why does timing matter so much?
An exchange has strict deadlines for finding and closing on the next property, and missing one can put the tax benefit at risk. Your CPA and intermediary will give you the exact rules and dates for your situation. I won't guess at them on a web page.
What I do is plan the sale and the purchase together. That means choosing a listing date, offer terms, and an escrow timeline that leave you room to find and buy the next property, and not rushing to buy something you don't want because a deadline is close.
How do you price and prepare an investment property?
I start with what it's worth in today's market, as a range across different ways of selling it: as it is now, with a few light updates, and everything in between. You can see that range in a free EPIC® Report, and you can request it here.
If there's a tenant in the property, that changes the plan, and I've written about it on the tenant-occupied page. If it needs work you don't want to take on, see selling a fixer to compare the options.
Who does what in a 1031 exchange?
Your CPA decides whether an exchange fits your taxes and tells you the rules. The qualified intermediary handles the paperwork and holds the money during the exchange. Your escrow and title team run the closings.
I run the real estate: pricing, preparing, marketing and negotiating the sale, and helping you search for and buy the next property. You get me from start to finish, and I keep everyone on the same timeline so nothing gets missed.
Where do I start?
Start with a conversation, before you list. Tell me what you own, when you'd like to sell, and what you want to buy next. We'll work out the real estate side together, and I'll be ready to work with your CPA when you bring them in.
You can book a call or text me at 818.237.2600.
