A Guide to Construction 1031 Exchange

Forward 1031 Exchange transactions can be used to take advantage of the Construction 1031 Exchange strategy.  This combined 1031 Exchange method allows the investor to sell the relinquished property first and then identify and acquire the replacement property as well as make improvements to the replacement property under1031 Exchange.

After the identification of the replacement property and the improvements to be made to the purchased replacement property, and the actual closing on the replacement property must be performed and completed within the prescribed 1031 Exchange deadlines.

1031 Construction Exchanges

The Construction Exchange allows the investor to structure a 1031 Exchange transaction where an investor can sell relinquished property and uses the proceeds from the sale to buy a replacement property.  It also allows the investor to use some of the sale proceeds to improve the purchased replacement property as part of the 1031 Exchange.

The proceeds received from the sale of the relinquished property are used toward the acquisition of replacement property as well as the proceeds that are paid or used for the improvement of the replacement property will qualify for tax-deferred 1031 exchange.

Construction 1031 Exchanges are combined or can be used as conjunction with a Forward Exchange or a Reverse Exchange structure.  These exchanges are complicated 1031 Exchange transactions; therefore, it should only be administered by a Qualified Intermediary that has good experience and expertise in the field of Construction Exchanges.

Construction Exchange with a Forward 1031 Exchange

 Forward 1031 Exchange transactions can be used to take advantage of the Construction 1031 Exchange strategy.  This combined 1031 Exchange method allows the investor to sell the relinquished property first and then identify and acquire the replacement property as well as make improvements to the replacement property under1031 Exchange.

After the identification of the replacement property and the improvements to be made to the purchased replacement property, and the actual closing on the replacement property must be performed and completed within the prescribed 1031 Exchange deadlines.

Construction Exchange with a Reverse 1031 Exchange

Reverse 1031 Exchange transactions can also be used to take advantage of this method.  This Combined Reverse and Construction 1031 Exchange method allows the investor to acquire replacement property, and it also helps the investor to improve the purchased replacement property when the investor is trying to sell the relinquished property.

The improvements that are made to the purchased replacement property, as well as the transfer of the replacement property with the completed improvements from the Exchange Accommodation Titleholder, must be performed and completed with the closing of the sale of the relinquished property within the given 1031 Exchange timelines.

It doesn’t matter which combined method does the investor choose, the Construction 1031 Exchange allows the investor to acquire replacement property and use some of your 1031 Exchange proceeds to improve the purchased replacement property.

All the information given above has been researched, and for consultation and assistance regarding 1031 Construction exchange you can call on – 888-876-6005 or email us at info@1031sponsors.com.

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