Right now, it’s a hot seller’s market. As a result, we’re seeing a lot of reverse 1031 exchanges. At the moment, it’s really easy to be the seller of a piece of real estate. It’s much harder to be the buyer because it’s so competitive. Inventories are tight and there’s a lot of competition for the same property. If you find a replacement property that you really want, the smartest move may be to put your energy into buying the replacement property first in a reverse 1031 exchange.
How a Reverse Exchange with a Qualified Intermediary Works
In a reverse exchange, most often a qualified intermediary forms an LLC and purchases the replacement property on the taxpayer’s behalf. Rather than having the taxpayer grant a mortgage to the lender, the intermediary’s LLC is the buyer of the replacement property and grants the mortgage to the lender. The taxpayer may funnel the down payment in, but the intermediary is the one who acquires the property and holds it for up to 180 days so that the taxpayer has time to sell their relinquished property. When that happens, the intermediary takes the replacement property that they’ve already purchased and passes it to the taxpayer to complete their 1031 exchange.
This is beneficial to the taxpayer because they don’t have to sweat the 45 day identification period as much because the replacement property is already locked in.
Reverse 1031 Exchange Company
If you’re thinking about doing a reverse 1031 exchange, don’t hesitate to reach out to the qualified intermediaries at CPEC1031 today to learn more about how we can help. We’ve got more than twenty years of experience facilitating exchanges and can help you defer your capital gains taxes. Contact us today at our Minneapolis office to seat up an appointment!
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.
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