A 1031 exchange allows an individual to sell a property and use the funds from that sale to assist in the purchase of a similar property without needing to pay capital gains taxes on the proceeds received from the sold property. It’s a great way to move from one property to another without incurring a large tax bill, but what happens if you’re not trying to utilize the tax benefit for a one-to-one exchange? In today’s blog, we explore how a 1031 exchange is processed if you’re hoping to relinquish or acquire multiple properties.
1031 Exchanges With Multiple Relinquished Properties
You are well within the tax code to put the proceeds of multiple properties towards the acquisition of a singular property. Perhaps you’re getting older and want to consolidate some of the investments, or you want to retire and move closer to family or warmer weather, and you want to exchange some properties for something closer to your new residence. There are plenty of reasons why someone would want to sell multiple properties and put those funds towards a larger, singular investment.
Of course, it will be a bit trickier to perform a 1031 exchange if you’re trying to move on from multiple properties, but it’s something we’ve done with clients in the past and we’d be happy to help you do the same. The biggest obstacle is the 45- and 180-day required windows for an exchange.
You have 45 days from closing on your relinquished property to identify your replacement properties.
You have 180 days from closing of the relinquished property to close on the purchase of the replacement property.
The same standard applies regardless of how many properties are being sold, but it’s important to recognize that the timer begins with the first sale. There are a few tactics you can use in this situation, including negotiating an extended closing with your buyer, or listing your properties at a competitive price to increase your odds of finding a buyer within that window, and we’d be more than happy to help you navigate the process successfully should you be looking to sell multiple properties within a 1031 exchange.
1031 Exchanges With Multiple Replacement Properties
Conversely, you can also sell one property and use the proceeds to fund the acquisition of multiple replacement properties. This may be wise if you’re looking to diversify your investment portfolio, or you’re hoping to capitalize on combined appreciation.
Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.
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