Build-to-Suit Exchanges: How to Construct Improvements to Your Property During a 1031 Exchange

A build-to-suit (aka construction) exchange is one type of like-kind exchange allowed under section 1031 of the Internal Revenue Code. In this article, we’re going to describe how you can construct improvements to your property as part of a build-to-suit construction exchange.

How Does a Build-to-Suit Construction Exchange Work?

A build-to-suit construction exchange works just like a typical forward exchange – you sell your relinquished property and then reinvest your proceeds into a replacement property. However, in a construction exchange, you incorporate construction improvements into your replacement property as part of your 1031 exchange.

Keep in mind that you still need to abide by your typical 1031 exchange deadlines in a construction exchange. Specifically, you only have 180 days total from the start of your exchange to the end of your exchange. That puts some significant restrictions on how much construction you can do so it’s important to keep those dates in the back of your mind throughout the process.

What are the Benefits of a Construction Exchange?

The great thing about a construction exchange is that it allows you to tailor your relinquished property to better meet your needs, rather than trying to find a perfect turnkey property (which can be difficult).

Find an Intermediary for Your 1031 Exchange

Find a qualified intermediary for your next 1031 exchange of real estate today by contacting CPEC1031, LLC. Our team consists of 1031 exchange professionals with more than two decades of experience in the like-kind exchange industry. With our expertise, you can rest assured that your exchange is in good hands. We can help prepare your required documentation for the exchange, answer your questions, and guide you through the 180 day exchange period from start to finish. Contact us now at our Twin Cities office to learn more about the exchange process and how we can help!

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Using a 1031 Exchange to Exit Active Management and Enter Passive Investments

A 1031 exchange can be used by any United States taxpayer who wants to defer capital gains taxes while selling and purchasing qualifying real property. In this article, we are going to talk about how you can use a 1031 exchange to exit an active management investment and enter a passive investment.

The Versatility of a 1031 Exchange

One of the greatest benefits of a 1031 exchange is the versatility it offers. A 1031 exchange allows you to move between different geographic areas, as well as different real estate sectors. This presents a fantastic opportunity for people who want to sell their active management properties and enter a more passive real estate investment (while deferring capital gains taxes).

For example, you could sell a rental property (an apartment building, fourplex, etc.) and 1031 exchange into a less management intensive property like a REIT (Real Estate Investment Trust).

This is an especially popular strategy for taxpayers who want to retire and no longer want to deal with the headaches that come with owning active management property.

Take the First Step with Your 1031 Exchange

Take the first step with your 1031 exchange by calling a qualified intermediary at CPEC1031, LLC. We have been helping taxpayers for over twenty years with their 1031 exchanges of real property and we can help you too! Reach out to us at our Twin Cities office to get to know more about the benefits of 1031 exchanges and see how we can help you defer capital gains taxes when selling qualifying real estate. We facilitate exchanges under section 1031 of the Internal Revenue Code throughout the state of Minnesota and the entire United States.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Reverse 1031 Exchanges: How to Buy First and Sell Later

A reverse 1031 exchange is just one of several types of like-kind exchanges that are available for use by all United States taxpayers. In this article, we are going to talk about how a reverse 1031 exchange allows you to buy first and sell later.

How a Reverse 1031 Exchange Works

A reverse 1031 exchange allows you to first buy your replacement property and sell your relinquished property later. This is the reverse order of operations of how a 1031 exchange typically works. In a forward 1031 exchange (the most common type), you sell your relinquished property first and then acquire your replacement property later to complete the exchange. A reverse exchange works in the opposite direction. It begins with the acquisition of your replacement property and ends with the sale of your relinquished property.

When to Use a Reverse 1031 Exchange

So why would someone want to do a reverse 1031 exchange? Why not just sell your relinquished property first? A reverse exchange can be extremely helpful during a hot real estate market, when there’s a lot of competition for replacement properties. In a forward exchange, you would need to sell your relinquished property before purchasing your replacement property. But in a reverse exchange, you can lock up your replacement property first and ensure it doesn’t get bought up by another party.

Get Help with Your Like-Kind Exchange of Investment Real Estate

If you are looking for help with your like-kind real estate exchange, you’ve come to the right place. CPEC1031, LLC is your go-to guide to all things 1031 exchange. With more than twenty years of experience in the 1031 exchange industry, we are well suited to help you with your next real estate exchange. Whether you need help finding a replacement property, or you simply have questions you need answered about the like-kind exchange process, we are ready and waiting to help you! Reach out to us at our Minneapolis office to learn more about our 1031 exchange services and get your next exchange up and running.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

The Biggest Mistakes You Can Make in a 1031 Exchange

Over the past 20+ years in the 1031 exchange industry, we’ve seen taxpayers make a lot of costly mistakes when conducting 1031 exchanges. In this article, we’re going to talk about some of the biggest mistakes you can make when doing a 1031 exchange.

Common 1031 Exchange Mistakes

Here are a few of the more common 1031 exchange mistakes we see taxpayers make:

• Perhaps the most common mistake people make when navigating a 1031 exchange is not establishing a working relationship with a qualified intermediary (QI) before closing on the relinquished property.

• Another major pitfall is failing to follow the strict 45-day and 180-day timelines. It’s important to remember that you only have 180 days total from the start to the finish of your exchange. On top of that, during the first 45 of those days you need to identify your replacement properties.

Pro tip: Always reach out to a qualified intermediary like CPEC1031 first, even when you're just thinking about a 1031 exchange. An intermediary will be able to tell you how to best proceed with your exchange so you have the best chance of deferring 100% of your capital gains taxes.

1031 Exchange Professionals in Minneapolis, MN

The like-kind exchange professionals at CPEC1031, LLC have more than twenty years of experience working on 1031 exchanges in Minnesota and throughout the entire country. Regardless of the details of your like-kind exchange, we can help you through the process from start to finish and make sure you have all the information necessary for the closing table. Our qualified intermediaries are ready and waiting to assist you through the intricate details of your next 1031 exchange. Contact us today to get started with your like-kind exchange!

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved

Can You Ever “Cash Out” in a 1031 Exchange?

We talk a lot about how you generally want to avoid “cashing out” during a 1031 exchange, but are there any situations in which you can cash out? In this article, we are going to talk about when (if ever) you can cash out in a 1031 exchange.

Cashing Out

In general, you want to avoid cashing out at all costs in a 1031 exchange. When you receive cash during a 1031 exchange, that is considered taxable boot and would prevent you from deferring 100% of your capital gains tax (which is typically the primary reason for conducting a 1031 exchange). You certainly can cash out in a 1031 exchange, but in most cases, you wouldn’t want to.

However, there are some situations in which you may want to consider cashing out.

A Cash Out Strategy

A cash-out strategy involves refinancing your properties in the future or converting them to personal use after holding them for investment or business purposes, then selling them as your primary residence.

Alternatively, you can continually exchange properties through 1031 exchanges and eventually pass them to your heirs tax-free with a stepped-up basis when you die.

Find a Qualified Intermediary for Your Unique 1031 Exchange

Find a qualified intermediary who can handle the unique details of your next 1031 exchange by reaching out to CPEC1031, LLC. We have decades of experience facilitating like-kind exchanges under section 1031 of the Internal Revenue Code. Whether you’re doing a forward exchange, reverse exchange, construction exchange, or something more complex, we are here to help you defer your capital gains taxes. Reach out to our team of Twin Cities 1031 exchange professionals today at our Minneapolis office to learn more about the exchange process and see how we can help!

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2025 Copyright Jeffrey R. Peterson All Rights Reserved