Types of 1031 Property Exchanges

If you have an investment / rental property which you wish to sell and use the proceeds to buy another, there are 4 types of 1031 real estate exchanges that you can perform:

Simultaneous Exchange

This is where the exchange is performed on the same day as the 2 property closings, i.e. the property sold and the one purchased. This is the simplest and thus most straightforward of the types of closings.

Delayed Exchange

This is where the closing of the property purchased occurs at a later date to the property sale. There are strict timelines (a 45 day and a 180 day timeframe) which must be followed for this type of exchange.

Reverse Exchange

By reading the title you will probably realize that this is where the closing of the sold property occurs at a later date to the closing of the purchased property. This is usually performed by an intermediary taking title of the property until such time that the old property is sold. Once the property has been sold then the intermediary conveys the title to the person wanting to perform the 1031 exchange.

Improvement Exchange

Also called a title holding exchange this is where the person wants to purchase a property and perform some improvements on the new property before the 1031 exchange is performed. This useful when the person wants to bring the value of the new home up so that it is greater to that of the property sold, so that they will not have to pay tax on the gain. The improvements can be made to an unimproved lot or on an existing building. The process is similar to that of the reverse exchange where an intermediary take title of the property until such time that the improvements have been made.

The owners of this site provide no guarantee that the information on this page is correct and advise you to consult a real estate tax specialist before undertaking any real estate transaction based on a 1031 exchange.